"The Immiseration of Labor?"
Reader JS writes in with the question that eventually bothers everyone who thinks long enough about economic growth:
I would like to believe we’re heading for a future were everybody is so productive that they can live a good life working 20 hours a week. But I fear we’ll get a society where perhaps 10% of the people will own all the land and capital, and they will hire 60% of the people to work for low but comfortable wages, while 30% will be totally dependent on a welfare and the odd temporary job every now and then.
If this scenario is a real possibility, then the only solution I can imagine is highly progressive taxation and wealth distribution, so that the great masses can afford to employ each other (with restaurant meals and dance lessons).
So is it a possible scenario/olution, or am I missing something?
I have heard that during the great depression, many people feared this scenario becoming the new normal, and that even Marx predicted this would happen (and that after that, the masses would revolt and institute Marxism).
People often don’t realize it (though Karl Smith does) but Marx was in many ways working in the tradition of classical economists like David Ricardo and Adam Smith.
At any rate, I’m not blogging about land use at the moment because I’m hoping to build enthusiasm for a potential book, so let’s focus on the “capital” side of this arrangement. What’s missing from the doom analysis (and this is fresh in my mind since coincidentally I’ve been reading Ricardo) is the “human capital.” Employee compensation accounts for the majority of GDP because the majority of the actual capital available to the economy is inside people’s heads. There’s a Race Between Education and Technology and we haven’t seen this immiseration of labor happen because, on average, people have improved their human capital faster than physical capital has rendered it obsolete. But I don’t think this is a law of nature. You could imagine the development of effective, but highly expensive, genetic engineering technology totally destabilizing the situation.