The president calls this a structural issue—we usually call it progress.
—Russell Roberts, George Mason University and a research fellow at Stanford’s Hoover Institution, writing in an op-ed in today’s WSJ
The structural issue Roberts floats is innovation-led unemployment, a conceit he attributes to Obama. If technology leads to productivity improvements, and with productivity improvements, employees can produce more, then employers can also produce more, but they can do it with fewer employees. For fear of this, Roberts claims that Obama is against technology, productivity, and progress.
Roberts correctly equates technology’s impact on productivity with progress, but he is wrong to suggest that President Obama is either too dim or too backward to embrace it.
The benefits of increased productivity accrue to a higher standard of living. While the operating expense of the hen-houses and textile mills enumerated in his article decline, the cost of the eggs for breakfast, the chicken-dinner, and the linens to accompany them also decrease, making life more affordable and, perhaps, even more enjoyable.
It’s not that Obama and his administration don’t understand this. They do, all too well. Jay Carney, the White House Press Secretary, recently said of the tech industry: “It is a model, really, for that kind of economic activity that we want to see in other cutting edge industries in the United States.”
And let’s not forget, just a few months earlier, the State of the Union. Win the future isn’t about a sporting event. It’s about winning the arms-race of innovation that powers the economy, so America can remain competitive with rising giants, such as India, China, and others.
Half a century ago, when the Soviets beat us into space with the launch of a satellite called Sputnik¸ we had no idea how we’d beat them to the moon. The science wasn’t there yet. NASA didn’t even exist. But after investing in better research and education, we didn’t just surpass the Soviets; we unleashed a wave of innovation that created new industries and millions of new jobs.
Obama invokes the Sputnik metaphor in an effort to spur innovation, not retard it. He hearkens revolutions in technology in terms of how they have transformed the way we live, work and do business. The fact that steel mills can now accomplish with 100 workers what once needed 1,000 workers is a point of pride, not shame.
So why does Obama bemoan a structural issue? He clearly supports technology and innovation and deeply understands the link between increases in productivity, economic growth and improvements in the overall standard of living. It’s not only because Roberts has it wrong in his caricature. Roberts ignores what is indeed a valid observation. There is a structural issue, but it’s not the one he would have you believe.
The structural issue Obama cites boils down to the economy’s urgent need deliver not only more jobs, but jobs that are less easily displaced by technology. He explains, “you go to a bank and you use an ATM, you don’t go to a bank teller, or you go to the airport and you’re using a kiosk instead of checking in at the gate.” He’s not averse to technology. He just wants to remind people that economic growth relies on fostering the enterprises and technologies that will put those people back to work, not as bank-tellers and flight-gate attendants, but in roles that are less easily displaced and commensurately more productive.
But Roberts provides a poor guide for resolving this issue. He assumes rising profits and accumulated capital will drive future growth and employment on their own. They don’t. He writes, “When it gets cheaper to make food and clothing, there are more resources and people available to create new products that didn’t exist before.” But that doesn’t seem very capitalist. The mere accumulation of capital does not predicate investment in new goods and services. Perhaps it would in a planned economy, such as China, but greater supplies of capital and resources on their own do not lead to growth. End-market demand does.
The fact that companies are sitting on record amounts of cash belies Roberts’ position. They’re sitting on cash precisely because they’re unsure there will be adequate demand to reward their investment. After all, the largest growing segments of the labor market have been poorly compensated, hard to automate service roles.
Speaking recently, Robert Shiller reminded us that “When the demand isn’t there, you can lower interest rates all the way to zero and people are still not willing to spend — that’s where we are right now.”
This is the structural issue that Obama sees when he sees the mounting numbers of displaced workers. This is what he means when he says:
Maintaining our leadership in research and technology is crucial to America’s success. But if we want to win the future – if we want innovation to produce jobs in America and not overseas – then we also have to win the race to educate our kids.