America’s structural unemployment problem may also be its solution.

by Robert Maynard

As has been pointed out in a recent TNR Commentary by David Usher, “America’s Unemployment Problems may be Structural“.  I agree with the general thrust of the article, but think that the solution may lie in the very same structural changes that are creating the problem.  The article notes that:

Growing the economy is complicated by the structural changes and dislocations from accelerating technological change which are ‘eating’ traditional jobs, jobs that previously required humans, often low-skill, low-priced humans. What’s happening now is some higher skills are being replaced by technological efficiencies.

Already in many industries and occupations, we have seen that digital and robotic technologies have permanently displaced jobs and some skills. With investments in these technologies companies can increase economic output without the corresponding increase in jobs that was both expected and experienced by workers in the past as America exited economic downturns. The upshot is that many jobs simply will not return and these doldrums are more or less permanent.

Authors  MIT’s Erik Brynjolfsson and Andrew McAfee argue the same thing in their book:  Race Against the Machine.  Here is how one Amazon.com review sums up their argument:

Why has median income stopped rising in the US? Why is the share of population that is working falling so rapidly? Why are our economy and society are becoming more unequal?

A popular explanation right now is that the root cause underlying these symptoms is technological stagnation– a slowdown in the kinds of ideas and inventions that bring progress and prosperity.

In Race Against the Machine, MIT’s Erik Brynjolfsson and Andrew McAfee present a very different explanation. Drawing on research by their team at the Center for Digital Business, they show that there’s been no stagnation in technology — in fact, the digital revolution is accelerating. Recent advances are the stuff of science fiction: computers now drive cars in traffic, translate between human languages effectively, and beat the best human Jeopardy! players.

This is a case of our strength also having a flip side that is a weakness.  The fact that this is a strength that gives America a great global advantage in the Information Age economy of the 21st Century was recognized by the Japanese government when they were looking for the key to escaping their “lost decade”.  In in looking for such keys they learned some pretty interesting lessons and prepared a report on what it will take to prosper in the 21st Century Information Age global economy. The report is entitled “The Frontier Within: Individual Empowerment and Better Governance in the New Millennium“.  In the report, they note the advantages America has in the “Information Age” global economy.  “Some judge globalization to be no more than Americanization or to mean the unilateral imposition of American standards. It is true that the United States currently enjoys an overwhelming advantage in the multiple processes of globalization.”

What are those “multiple processes”?

At the same time there has been movement toward integration driven by the emergence of English as the international lingua franca and the overwhelmingly superior position of those who control information and IT. We also see a trend toward what we might call realignment-the challenging of established industries by new industrial players, the loss of state control, and the growth of individuals’ say, accompanied by a regrouping of winners and losers based on a widening of the gap between the information “haves” and “have-nots.” Meanwhile, the construction of multiple networks has broadened the opportunities for women and members of other traditionally disadvantaged groups to participate more fully in society and has provided a path for the sudden opening up of individual options and opportunities for self-realization.

This brings us to what the author’s believe will be the essential theme of the 21st Century:  “If the twentieth century was the century of the organization, the twenty-first century will be the century of the individual. … Individual freedom and empowerment, so far enjoyed by only a handful of people, will be within reach of the great majority. If so, it is all the more important that each and every person firmly establish his or her individuality.”

What we may be seeing is a reversal of the tends that occurred when we moved from the Agrarian Age to the Industrial Age.  We went from a nation of largely self-employed workers to a vast industrial army working for large corporations.  I think that the structural changes that are displacing jobs are part of a larger trend that is playing itself out as we move from an Industrial Age economy to an Information Age economy.  The trend is moving away from employment at large corporations to self employment and employment at small companies.  The transition will not be without its losers, but the new employment opportunities could very well end up outweighing the opportunities lost.  The Japanese identified some obstacles to thriving in this new environment:

To cultivate these qualities, society needs a firmly established ethos and systems that welcome and give full rein to excellence. Unfortunately, Japanese society still tends to frown on displays of individual excellence. This is closely bound up with an ingrained egalitarianism. The Japanese are preoccupied with equal outcomes, and in a vertically segmented, horizontally egalitarian society the nail that sticks out is hammered down. The relentless demand for equal outcomes has led to unequal opportunities.

Obviously, America is seen as having the advantage in the global economy of the 21st Century because of our encouragement of creative individualism. The problem is that the American tradition of responsible individualism is being challenged by the collectivist egalitarian mentality that came with the bureaucratic welfare state.

This is true not only of economic hurdles erected in front of the successful, but even in the discouragement of any form of competition among our young in the school system. Self esteem is now more highly regarded than actual achievement. The end result is to raise a generation that has high self esteem, but is ill prepared to compete in the global economy. We here in Vermont are particularly bitten by the collectivist egalitarian bug. While our political leaders brush off the fact that we have one of the highest tax burdens in the nation on the grounds that the distribution of that burden is “progressive”, our schools are engaged in insane ideas that promote group identity over individual excellence.

So, contrary to the fantasies of the central planners, the American tradition of responsible individualism is a very important key to prosperity in the 21st Century global economy. Our individualism and its encouragement of individual excellence is what gave us a significant head start. Are we going to throw that advantage away by humoring our utopian welfare state central planners and their collectivist egalitarian vision? Nowhere in our country is this question more in doubt than right here in Vermont where that creativity crippling vision is most advanced. Will modern day Green Mountain Boys rise to the occasion to reclaim Vermont’s own tradition of creative individualism? These are not idle questions, as our future depends on getting the answer right.