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Ronald Reagan once said, ‘Progress is our most important product.’ He was speaking of General Electric, for whom he worked. But he also meant America. Writing in the 1950s, Daniel Bell, the great American sociologist, said, ‘economic growth has become the secular religion of advancing industrial societies’. He was right. It follows that in its absence, many people lapse into the equivalent of atheism.
America’s opioid epidemic is another warning light. Émile Durkheim, the father of modern sociology, said that when societies hit a civilisational break the suicide rate soars. Deaths from drug overdoses have tripled
Other symptoms of stagnation include falling tolerance for other people’s point of view, and a fading enthusiasm to join social groups. ‘I believe that the rising intolerance and incivility and the eroding generosity and openness that have marked important aspects of American society in the recent past have been, in significant part, a consequence of the stagnation of American middle-class living standards,’ writes Ben Friedman, in the The Moral Consequences of Economic Growth.22
Adam Smith, the great theorist of free trade economics, is revered for his The Wealth of Nations. His companion work, The Theory of Moral Sentiments, is mostly forgotten. Yet it is the more important of the two. In it, Smith sets out why capitalism works best in societies where there are high levels of trust between its participants.
Tyler Cowen, who is perhaps the most lateral-thinking economist I know, talks of the rise of America’s ‘complacent classes’ – the creep of a risk-averse and conformist mindset. In a supposed age of hyper-individualism, eccentricity is penalised. Software screens out job applicants before they have a chance to show their faces. Matchmaking algorithms do the same for our love lives. Cowen detects conformism even in the liveliest Silicon Valley companies. Most of its denizens wear some variation on the casual hipster uniform and all dutifully strip the paint off their office walls. They litter
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Both history and theory told us that the rising inequalities created by industrialisation would be followed by the strong forces of equalisation as societies became richer.
In contrast to the industrial era, however, today’s inequality is accompanied by vanishing mobility. It is not just that people are staying physically put. They are also likelier to stay trapped in the same income group. America, in particular, which had traditionally shown the highest class mobility of any Western country, now has the lowest. Today it is rarer for a poor American to become rich than a poor Briton, which means the American dream is less likely to be realised in America.
Unlike during the early Industrial Revolution, today’s poor are not intentionally being displaced. Instead they are being silently priced out of their homes. They are falling victim to creeping gentrification,
More of Britain’s poor live in suburbia, or ‘slumburbia’, than in the cities nowadays.39 This is creating a new kind of poverty, where the poor are increasingly pushed out of sight. This physical segregation matches the labour market’s bifurcation. The rich and the poor no longer live near each other, and the middle class is hollowing out.
It should come as little surprise, therefore, that the murder rate has fallen by 16.7 per cent in the US cities since the turn of the century, while rising by 16.9 per cent in the suburbs – almost an exact mirror image.
The West’s metropolises are in the midst of a grand renaissance. These are the knowledge hubs and global cities that have more in common with their international counterparts than with their national hinterlands. Anyone who doubted this was disabused in 2016. Almost two-thirds of London voted to stay in the European Union. The rest of England and Wales disagreed.
One of the ironies of the West’s booming cities is how much lip service its more fortunate denizens pay to a progressive worldview. We really couldn’t ask for a nicer elite. Yet the effects of how they spend their money are hardly progressive. For all the emphasis we place on our multicultural cities, they epitomise our oligarchic reality. In the US, the more liberal a city’s politics, the higher the rate of inequality.
The jobs market offers a snapshot of rising inequality. The fastest-rising area of blue-collar jobs growth is the security industry – the private guards, police and other uniformed occupations that keep the wealthy neighbourhoods safe. The share of the labour force employed in this industry, which also includes prison guards, has risen by almost a third since the 1990s.
The new residents then lock in their gains by restricting land use, which keeps values high. Richard Florida calls them the ‘new urban Luddites’, who exploit an ‘enormous and complex thicket of zoning laws and other land use regulations’ to keep the others out. Tyler Cowen has coined a new acronym to replace Nimbys (Not in My Backyard): Bananas (Build Absolutely Nothing Anywhere Near Anything).
Karl Marx was wrong: it is the rich who are losing their nation, not the proletariat. The gap between global cities and their national anchors is already a metaphor for our times.
On the evidence so far, this latest technological revolution is different in its dynamics from earlier ones. In contrast to earlier disruptions, which affected particular sectors of the economy, the effects of today’s revolution are general-purpose. From janitors to surgeons, virtually no jobs will be immune.
Or take social media. In 2006, Google bought YouTube for $1.65 billion. It had sixty-five employees, so the price amounted to $25 million per employee. In 2012 Facebook bought Instagram, which had thirteen employees, for $1 billion. That came to $77 million per employee. In 2014, it bought WhatsApp, with fifty-five employees, for $19 billion, at a staggering $345 million per employee.
By skewing the gains of the new economy to a few, robots also weaken the chief engine of growth: middle-class demand. As labour becomes pricier relative to machines, spending power falls. The US economy produces more than a third more today than it did in 1998 with the same-sized labour force and a significantly larger population.
Technology is often treated as a separate force to globalisation. In reality they are the same thing. The first great phase of globalisation, which went up in flames in the First World War, was driven by steam power.
What has befallen the West’s blue-collar workforce in the last generation is the shift of routine physical tasks to the factory floors of the developing world. This was enabled by the relentless drop in the cost of transport. What steam did in the nineteenth century, aeroplanes, supertankers and mechanised ports did for the last third of the twentieth century. The explosion of communications technology in the twenty-first century is enabling Western companies to do precisely the same in the knowledge economy today.
In the short term it is not artificial intelligence the West should worry about. It is what Baldwin calls remote intelligence.
How many times have you talked to a computer recently, rather than someone with an Indian accent? A lot more than a few years ago, I would guess. Automated voice software is supplanting humans. India is thus being forced to upgrade. Its next generation of offshore jobs will be devoted to far more complex tasks, such as providing medical diagnoses, writing legal briefs, remotely supervising factories and plants, and doing consumer data analysis.
But a rising share has been forced by low pay or redundancy into the informal jobs market. They account for all of jobs growth since the Great Recession. In the US, formal employment has shrunk by 0.1 per cent a year since the 2008 financial meltdown. All of America’s new jobs have been generated by independent work, which has risen by 7.8 per cent a year.65 The next time an economist boasts about America’s low unemployment rate, remember that number means something very different from what it used to.
The age of automation is making labour increasingly dispensable, so companies are constantly on the lookout for ways to slim down. The new economy has created digital platforms that enable people to offer their services online. Yet what they find is generally far less secure than what they lost.
We often kid ourselves that the disruptive economy is driven by creativity. But most of it involves the extreme application of digital networks to whatever area applies.
After a while, the data elites may too feel the pinch. Their business model is the opposite of what Henry Ford did when he raised the wage he paid to factory employees to $5 a day, a sum that in the 1920s would afford a comfortable middle-class lifestyle. Three decades later, Ford switched his model when he began to invest in automation. On a tour of the plant with Walter Reuther, the auto union leader, Ford pointed at the robots and said: ‘How will you get union dues from them?’ Reuther replied: ‘How will you get them to buy your cars?’69 It was a good question. We might ask the same today of
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Whether you listen to utopians or dystopians, all agree the share of jobs at risk of elimination is rising. McKinsey says almost half of existing jobs are vulnerable to robots. We are ill-equipped to adapt. Two-thirds of children entering school today will end up in types of job that currently do not exist. Nobody has yet found a remedy.
The more we cede power to global bodies, the more virulent the backlash against globalisation. Dani Rodrik, one of the world’s leading international economists, talks of the global trilemma.77 We cannot simultaneously pursue democracy, national determination and economic globalisation.
In Enlightenment terms, our democracies are switching from John Locke’s social contract to the bleaker Leviathan of Thomas Hobbes. We are on a menacing trajectory brought about by ignorance of our history, indifference towards society’s losers and complacency about the strength of our democracy. It has helped turn society into a contest of ethnic grievances, in which ‘awakened whites’ – as the alt-right now call them – are by far the largest minority.
