Automation Kills Jobs and Brings Mass Poverty. Call That Progress?

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The St. Nicholas Breaker, seen in a state of demolition, was once the world's largest coal breaker but closed in 1972 in Manahoy City, Pennsylvania. Most of the nearby coal mines have also closed, and 17.4 percent of the town's population now exists below the poverty line, with a median household income of $24,347. Robert Lord writes that the transformation we’re witnessing in the retail sector will repeat itself when online retailers enter the grocery business, electronic tablets replace servers at restaurants, hamburger-making robots replace fast-food workers and driverless vehicles replace everyone who currently drives a vehicle for a living. Those transformations are all underway. Mark Makela/Getty

Throughout America's small towns and suburbs, you can see the ominous markers of a coming sea change. Empty storefronts. Gutted strip malls. Vacant shopping complexes.

Indeed, nothing captures America's perverse economic picture better than the transformation happening in the retail sector. Brick-and-mortar retailers are hemorrhaging jobs: 90,000 since last October. That's 15,000 lost jobs per month.

Meanwhile, Jeff Bezos, the founder of online retailer Amazon, has become the nation's second richest man—and a virtual lock to be No. 1 within a few years, if not months. Bezos's wealth has tripled in just over two years, a tidy $50 billion increase. That's over $1.5 billion per month.

The connection between those two trends is indisputable. Every month, the same forces that destroy the jobs and turn upside down the lives of 15,000 Americans drive $1.5 billion into the pocket of the second-wealthiest American.

It's the real-life embodiment of a Tom Tomorrow cartoon I saw years ago: the One Rich Guy Who Owns Everything. "Over the years, income inequality continued to rise," the comic begins, "until finally, one rich guy owned as much as the rest of the planet combined."

The strip was meant to be an extrapolation of wealth inequality to its most absurdly concentrated point. It was satire. But the more absurd thing is that we're actually trending in that direction.

One Rich Guy

Consider the trend since the inaugural appearance of the Forbes 400 list 35 years ago. In 1982, the wealthiest 400 Americans had a combined net worth of slightly less than 1 percent of the nation’s aggregate wealth. Today, according to the Bloomberg Billionaires Index, the 20 wealthiest Americans enjoy that same slice.

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Reflect on that. The size of the group of wealthy Americans accounting for 1 percent of the country's wealth has been trimmed by 95 percent in just 35 years, from 400 to 20. If that group were reduced by the same amount over the next 35 years, what would we have?

In three words: One Rich Guy.

Obviously, "One Rich Guy" is hyperbole. But the idea that one guy, or even 20 guys, could control a full 1 percent of the wealth in a country of over 300 million should alarm our leaders. Instead, they're concerned that the contenders to be the country's One Rich Guy are being taxed unfairly. ("Why do you want to punish his success?" asks a lawmaker in Tom Tomorrow's dystopian cartoon, in front of a dilapidated Capitol building.)

Could the trend of the past 35 years continue? Actually, it could accelerate.

Consider the transformation we're witnessing in the retail sector repeating itself when online retailers enter the grocery business, electronic tablets replace servers at restaurants, hamburger-making robots replace fast-food workers and driverless vehicles replace everyone who currently drives a vehicle for a living. Those transformations are all underway.

If nothing else changes, each will destroy millions of livelihoods while making a handful of Americans fantastically wealthy.

It's as if the fears of the Luddites weren't wrong, just premature.

The Fruits of Progress

Should technological progress be something we fear? Of course not. But the British science fiction writer Arthur C. Clarke had a point when he proclaimed, "The goal of the future is full unemployment, so we can play."

Yet instead of creating more leisurely lives for the masses, today's technical progress instead threatens to impoverish them while driving the bulk of the country's wealth into the hands of a group so small it couldn't fill a basketball arena.

Historically, American workers shared proportionally in our productivity gains, which translated into both increased worker income and reduced hours—in other words, more time for play and more money to play with. But that trend toward the utopia Clarke envisioned came to a grinding halt about 35 years ago.

Despite continued productivity increases, deliberate policy choices have led to worker wages stagnating even while corporate profits have soared.

Unfortunately, what's happened over the past 35 years may not be the worst of it. Until now, increases in the demand for goods and services have more or less kept pace with productivity increases, which has allowed the hours available per worker to stay relatively constant.

Workers as a group, therefore, have been able to tread water (even though some groups, such as today's employees and yesterday's factory workers, have struggled).  

But what happens if increases in demand can't match the pace of productivity? If workers no longer have the wages to participate in their productive economy? Eventually, you get One Rich Guy—and social ruin.

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What was Clarke's solution for avoiding this neo-Luddite nightmare? Simple: "We have to destroy the present politico-economic system," he opined.

Maybe that sounds like a bit much. But we sure as heck need to change it, and not just at the margins. Which means we don't have room for political leaders who believe the road to mass prosperity is trimming the tax burdens of billionaires while questioning benefits for the masses.

Instead, we need policies that let the fruits of tomorrow's technological progress flow to our society as a whole, not just the luckiest among us.

Otherwise, we can start taking bets on who will be America's One Rich Guy.

Bob Lord, a tax lawyer and former congressional candidate, is an associate fellow at the Institute for Policy Studies.