The first thing you should know about Marshall Brain is that he is not, despite his dim take on the future, a Luddite. To people who’ve read some of his essays, this is hard to believe, but Brain, a 42-year-old businessman and father of four who lives in Raleigh, N.C., has always been passionate about technology. In college, Brain studied computer science and electrical engineering. He went on to start a computer consulting firm and to write several programming manuals, and then, in the late 1990s, Brain jumped on the dot-com gravy train. He created HowStuffWorks.com, an ingenious collection of Web pages that explain everything technical under the sun, from light-emitting diodes to limited slip differentials to Botox.
The second thing you should know about Marshall Brain is that he is gravely concerned about the ongoing tech revolution. Perhaps because he has so much faith in technology, Brain sees no bounds to its progress, and he believes that within a short time — two or three decades — machines will be capable of doing much of what humans do now. In the past year, Brain has written a series of widely discussed essays and five chapters of a science fiction novel exploring this question: What will become of human society — especially the economy — when robots take all our jobs?
It might seem premature to begin worrying about competing for jobs with robots, but Brain is not just thinking about C-3PO and R2-D2. He points out that “primitive” robots — in the form of ATMs, pay-at-the-pump gas service, self-checkout machines at supermarkets, boarding-pass kiosks at airports — are among us already. These systems can provide profound benefits to society, but Brain believes that we must institute a series of progressive economic policies to make sure that the “roboticization” of our jobs does not cause massive destitution.
Is Brain right? Will technology send us to the unemployment line? In general, economists have a hard time answering this question. The relationship between job growth and productivity growth is complex, and even during today’s “jobless recovery” economists are arguing about whether recent productivity gains are helping or hurting Americans. But one thing appears certain — many of the jobs we rely on today will soon vanish from the American landscape.
“Technology is continuing to eat away at any routine services,” says Robert Reich, an economist at Brandeis University who served as President Clinton’s first labor secretary. “Anything that can be done by software, or by someone in China or India or the Philippines, is not going to be here. It will not pay a person to do it.”
Whether you think this is a good thing or a bad thing probably has a lot to do with whether your job will soon be automated out of existence.
Marshall Brain’s ideas are not completely novel — Bill Joy, Jeremy Rifkin, Raymond Kurzweil, Hans Moravec and others have been ruminating on the pros and the cons of robotic society for years. But Brain’s essays come at a particularly low point in the U.S. economy; after more than two years of constant job losses due to recession, automation, globalization and other forces of economic nature, Americans are probably quite ready to believe, these days, that bad times are here to stay. Job losses due to productivity gains in the manufacturing sector — in automobile factories, steel plants and textile mills — are already an old story. Soon, workers in the service sector — in, say, retail shops, restaurants, construction sites and all sorts of others that have so far been relatively unaffected by automation — will become as replaceable as the poor souls working in manufacturing.
Brain writes that in about 10 years, “every big box retailer will be using automated checkout lines. Robotic help systems will guide shoppers in the stores. The automated inventory management robots will allow the first retailer to lay off a huge percentage of its employees. Competitive pressure will force Wal-Mart, Kmart, Target, Home Depot, Lowe’s, BJ’s, Sam’s Club, Toys ‘R’ Us, Sears, J.C. Penney, Barnes and Noble, Borders, Best Buy, Circuit City, Office Max, Staples, Office Depot, Kroger, Winn-Dixie, Pet Depot and on and on and on to adopt the same robotic inventory systems in their stores.” Fifteen million people work in retail in the United States, and Brain guesses that automated systems will put 10 million of them out of work.
But retail-industry experts do not agree with Brain’s analysis; while cost-obsessive retailers like Wal-Mart could very well automate everything in their stores (Brain insists that the “robotic Wal-Mart” is not far off), higher-end retailers aiming for better customer service will probably still find use for humans. Indeed, according to people who’ve studied the introduction of self-checkout systems in supermarkets, cashiers being replaced by these machines are not being let go. Instead, companies move these people to other parts of the store, where they can better help customers find what they need. Even the United Food and Commercial Workers, the union that represents workers at A&P, Safeway, Kroger, Albertson’s and many other large supermarket chains, says that it has not seen any losses due to these machines — so far.
And this provides a good glimpse of what work will look like in the future. Instead of scanning and bagging someone’s groceries, perhaps it’ll be your job to walk a shopper through the store and help him choose the perfect wine or cheese, or maybe you’ll just be stuck watching the customer’s screaming 2-year-old while the shopper decides on gourmet olives. Reich says that, increasingly, low-end jobs will be in this “personal service” category; massage therapy and childcare are two growth fields he points to. The rest of us, if we’re lucky, will find work in what some people call the “knowledge business” — “in enjoyable but unessential activities like writing Salon articles and robot books,” as Hans Moravec, a robot scientist at Carnegie Mellon and the author of the book “Robot,” put it in an e-mail. These activities, Moravec suggests, will not easily be replicated by machines. Here’s hoping.
Few tasks seem as well suited to robots as those performed by cashiers at a retail checkout counter. Cashiers’ jobs are marked by a single simple, repeated activity — passing an item in front of a computerized scanner — and to excel at it, the best people probably have to be a little bit robotic themselves, scanning items quickly, efficiently, accurately, never allowing such human failings as exhaustion or annoyance to peek through.
In the 1990s, after noting the success of ATMs and pay-at-the-pump gasoline, several technology firms began looking to supermarkets and other retail outlets for the next self-service revolution. The companies guessed that shoppers would readily accept self-service machines. “Some consumers say that the shopping environment is so depersonalized they feel they might as well engage with technology,” says Mike Webster, the general manager for self-checkout systems at NCR, whose machines are now installed at Home Depot, Kmart, Wal-Mart and other stores. In the past, cashiers “used to know your name, they’d ask how your kids are doing,” Webster says. Cashiers don’t talk to you anymore, and customers wonder why they need this stranger to scan their items for them. Some people feel they “would best be left alone.”
Self-checkout systems are foolproof to use. You walk up to a machine, scan your items (a scale is provided for items sold by weight), and pay with cash or credit. That’s it. The machines operate in the mode of most other self-service technologies we’re used to, with on-screen prompts helping you along the way, just like on an ATM. Experts point out that the machines are not actually faster than a human teller — but because they’re always available, they typically have shorter lines than express lanes at stores, and because customers are actively involved in the scanning process, self-checkout seems quicker.
Because most supermarket shoppers are already familiar with other self-service technologies, many find self-checkout naturally appealing. In a survey he conducted in August, Chris Boone, an analyst at the technology research firm IDC, found that 80 percent of retail customers would use a self-checkout system if one was available to them. The appeal was not limited to a specific demographic set, Boone says — even old people liked the idea of self-checkout. Many customers who’ve used it say that self-checkout makes shopping faster and more convenient, especially for small purchases. Mike Webster, of NCR, says that the systems are also useful for people buying things they “might deem to be sensitive. If I have concerns over my privacy, I would just as soon use self-checkout.” And if you’re someone who has a hard time trusting the cashier, self-checkout is for you. “There are groups of people that use self-checkout to go slower, to make sure that they have all the discounts and coupons coming to them,” Boone says.
In most shops, one employee is charged with monitoring a collection of about four self-checkout machines. The attendant is there to help shoppers new to the system, and to watch out for stealing (many systems have built-in security cameras that the attendant can access). In theory, then, since the machines allow one person to do the work of four, self-checkout systems give stores a great way to cut down on labor costs. Technology firms usually sell the systems to stores by promising labor savings. But that’s not how things have worked out, experts say.
There was a time when ringing up groceries was the brightest job in the retail firmament — when the salary for these positions was “the crème de la crème,” says Greg Buzek, the president of IHL Consulting Group, which helps retail companies choose self-checkout systems and other technologies. But the days of high-flying cashier wages are long gone. Cashiers are often not paid much more than other retail employees; according to the Bureau of Labor Statistics, their national average wage in 2002 was $8.19 an hour. At those rates, Buzek says, people don’t see much glory at the checkout counter. “The same teenage girl that would have taken the job at the Kroger store has the opportunity to work at the mall at, say, the Gap,” Buzek points out. “And wouldn’t you rather work at the Gap?” Despite the high unemployment rate, Buzek says that supermarkets face constant labor shortages; and when they can cut down on labor needs at the checkout lanes, they redeploy their employees to other parts of the store. If people think self-checkout machines are “costing jobs,” Buzek says, “that’s not true.”
Labor groups have a hard time believing that, however. Self-checkout systems will have a negative impact on the number of jobs and the number of hours worked in stores, says Greg Denier, a spokesman for the United Food and Commercial Workers. “This is a continuation of a trend to eliminate service in the name of consumer convenience — at a certain point they may want to have the customers unload the trucks and stock the shelves, too.” Denier says that checking out groceries is worthwhile work, and supermarkets that want to eliminate the positions in favor of machines are being shortsighted. He concedes that — at least in the stores his union represents — workers who have been replaced by machines have not been laid off because of these new machines. “The UFCW has worked with employers to protect the jobs of our members in our stores,” he says. But Denier says it’s possible that people could lose jobs in the future, as the machines become more prevalent. But he also thinks that before long, customers will insist on human cashiers.
“The only reason consumers may find self-checkout convenient is because stores create a situation where customers have no choice,” Denier says. Stores deliberately understaff checkout lanes, Denier insists — but it won’t be long before customers rebel. “Full-service grocery stores will understand that their market differentiator is service,” he says. “People who go to a full-service grocery store go there because they want full service. We’ve had situations where grocery stores have eliminated meat cutters, but they had to bring them back because the customers demanded it.”
Are supermarket cashiers like meat cutters, or are they like bank tellers? Do they provide a unique, specialized, personalized service that customers think is worth paying extra for, or is what they do so automatic, so routine, that shoppers will see nothing essentially different when they deal with a machine? If you want to know whether your job will survive the coming age of robots, maybe you should ask this question of yourself. And if you realize that what you do requires nothing especially human, perhaps you should look into massage therapy.
For supermarket cashiers, the situation appears grim. Stores that install self-checkout machines find that each system pays for itself in about a year’s time, according to a study Greg Buzek conducted. And contrary to the UFCW’s theory, customers often say that service in stores improves with these systems; Chris Boone says that he knows of many stores that have installed self-checkout systems only because nearby competitors had done so. The Kroger chain, which was an early adopter of the technology, has installed about 5,000 machines in its stores, Buzek says, and it’s planning on deploying many more. Kmart and Home Depot have also bet on the technology. Home Depot expects to have the systems in half of its stores by the end of 2003; a spokeswoman said that the stores have not let anyone go because of these systems. In the stores that have these machines, “anywhere from 15 to 40 percent of the daily transaction volume and 12 to 30 percent of the daily [money volume] … is being handled by self-checkout machines,” Buzek wrote in a recent study of the systems.
These numbers corroborate Marshall Brain’s theory that humans will quickly adopt robotic help. “People love technology,” he says. “It’s faster, it’s usually less hassle, it makes less mistakes. We would happily go to a robotic anything.”
But, unfortunately for human workers, those lovable robots are getting better all the time. ASIMO, a robot created by Honda, can walk on two feet, just like humans. The thing is so lifelike that scientists in India have determined that, in addition to walking, ASIMO could be good for more intimate tasks. “One of the reasons for marital breakups today is physical inadequacy. Couples are so stressed out that there’s no time for foreplay, so essential to get the juices flowing. A smart machine can bridge that gap in no time,” Dr. CRJP Naidu of Bangalore’s Centre for Artificial Intelligence & Robotics told the Hindustan Times. Not long ago, Brain saw an article in Popular Science about a robot scientist who’d created an extremely humanlike robotic face — “a real face, with soft flesh-toned polymer skin and finely sculpted features and high cheekbones and big blue eyes,” the article said.
Brain is on edge about this development. “Imagine,” he says, “you walk into a restaurant and what appears to be a very attractive person is there to greet you. A robot with a database behind it would be so much better in terms of service than a human could be. There’s no competition — how could a fast-food worker who doesn’t even greet you be better than a robot? In a store, you’ll speak to a robot like you do to a human being, but it will have total information about everything in the store, it will carry your item out to your car, it’ll be so much better. And this is what’s so cool about robots. If you think about it, robots are a blessing — no one’s going to be scrubbing toilets anymore. But how do we deal with it?”
Robots have at least a few decades to go before they get as good as Brain says they can — but the concerns he raises about them are perhaps allayed by a look at what retailers are doing with their employees after they’ve installed self-checkout systems. “Let’s look at Kroger,” Buzek says. “They’ve got over 5,000 of these machines out there. They haven’t displaced a single worker, and instead they’ve added more people to the deli, to the cakes, to the fresh food department, and as such they’ve beefed up that customer service.” When these workers manned checkout lanes, they provided no valuable service for customers — they were a cost to the stores, Buzek says, because they only interacted with shoppers after all customers’ purchasing decisions were made. Now they’re in a position to help customers, and, of more concern to the store, to influence purchases.
Why are the stores doing this? Why don’t they reduce their labor force in order to cut costs and become the lowest-price retailer in town? “That would be stupid,” Buzek says, because most stores couldn’t offer the lowest prices even if they tried. Wal-Mart — which sells more food, drugs, toys, sporting goods and music than any other retailer in the world — already has the low-price niche sealed up. Competitors to Wal-Mart have higher prices, but they offer their customers additional benefits, like better service or more well-designed products — and for this these companies need human beings.
Brain, of course, believes that even in-store customer service tasks will eventually be performed by robots. But there are many tasks that would seem impossible, or at least undesirable, for robots to do. Would you want a robot taking care of your child? Would you want a robot nursing your aging mother? Would you want a robot working as a chef at your restaurant? Would you want to see robots playing tennis? If you tried on a suit at a store and a robot told you it thought you looked great, would you trust it?
“There are all sorts of jobs that can’t be done by robots because the essence of the job is providing personal attention,” Robert Reich says. These jobs can’t be done by foreigners either, “because they require someone to be there in person.” In the future, he says, a large portion of the American workforce will work in these fields. This is not an ideal situation. The problem, Reich says, is that many of these jobs don’t pay very well — but neither does scanning groceries.
At the same time, Reich says, “there is a continuing demand — and the demand is increasing — for people who can identify and solve new problems, who can innovate, who can create, who can discover, who are able to provide their companies or their enterprises with energy and competitive spark. These jobs — in research and development, engineering, design, advance sales, marketing, advertising, legal services, financial services, all sorts of Web-based creative services — these jobs take a hit in recessions but they are the many good jobs. They pay very well, and even if some may not pay handsomely, the psychic benefits are large.”
Reich refers to these jobs as “symbolic analytic” jobs, because “a large number of them require the ability to manipulate and analyze symbols, whether the symbols are words, numbers or visual images.” They require, in other words, a spark of human ingenuity and creativity, and these seem unlikely to be replicated in robots — at least not anytime soon.
Tor Dahl, a productivity expert who served as the head of the World Confederation of Productivity Science for 11 years, is even more lyrical than Reich on the idea that the human brain, rather than our hands, will become the driving force of the economy. “I’m a proponent of the coming productivity revolution, which could well double wealth every 12 years instead of the historical 36 years,” he wrote in an e-mail.
“Who will get this wealth? Knowledge will. Who are the owners of knowledge? Well, if corporations are, that will be mainly pension funds and American households. It will not be the robber baron template of the Industrial Revolution. Knowledge largely rests in human minds. Marxism has now been turned on its head: The means of production rests in the minds of individuals. Having abolished slavery, these individuals now own the means of production. The workplaces of the future will have invisible balance sheets for most of their capital, unless they somehow find a way to measure and include human capital.”
Dahl adds: “A productivity revolution will usher in an earthly heaven, albeit a materialistic heaven. It’s our only real chance to address and remove the old scourges of mankind: Hunger, disease, poverty and war. People always get nervous when prosperity beckons this side of heaven.”
Both Dahl and Reich concede that adjusting to this new economy will not be easy for everyone; when jobs that have been abundant vanish, workers who’ve spent their lives in those jobs won’t easily find something new to do. In the short term, this creates problems — not the least of them political. We’re currently seeing something like this in the U.S. manufacturing sector, which has lost almost 3 million jobs in the last three years. Both Democrats and Republicans are trying to appeal to voters in manufacturing states by showing that they’re at least trying to create new factory jobs. On Monday, Don Evans, the secretary of commerce, announced that he was creating an unfair trade practices team to monitor trade violations on the part of U.S. partners (the administration’s biggest suspect is China) and a new secretarial post to look into ways to promote domestic manufacturing.
“It’s bullshit,” says Reich. “Trying to protect certain manufacturing businesses by putting up tariffs and subsidies postpones the day of reckoning. Technological change and globalization are hugely powerful forces. We don’t want to go back to the days of the Luddites and destroy the machines. You have to remember that it’s not as if there’s a finite number of jobs in the world economy to be divided up between us and them.”
The answer to the threats posed by automation and globalization, argues Reich, is not to try to be defensive, to put up protectionist walls and lavish subsidies on threatened industries, but to be aggressive, and help people find new jobs. But right now, government support for training programs of the kind necessary is minimal.
“Of course, some people get slammed; some people are getting slammed in this jobs recession which continues on,” says Reich. “If you’re a 55-year-old assembly line welder and you lose your job because there’s a computerized system for doing that welding or because it can be done in Southeast Asia, we don’t have a pathway for you, we don’t have enough insurance, our training programs are few and far between and underfunded. We don’t have an easy route for you to find out what you need to learn. We don’t have any of those adjustment mechanisms, and those are critical in an economy that is changing as rapidly as ours. It’s cruel and unusual not to help people get the skills they need, the information they need, to get a new job.”
Now and then there are moments that clarify major trends in politics. Such a moment occurred recently, when François Hollande, the Socialist candidate for the French presidency, agreed with the French far right on the need to further limit immigration to France: “In a period of crisis, which we are experiencing, limiting economic immigration is necessary and essential.” For his part, Hollande’s opponent Nicolas Sarkozy criticized immigration in his first electoral run and as president of France has denounced deregulated markets.
This is not just a French phenomenon, nor is it limited to immigration policy. In most of the world’s advanced democracies, the egalitarian left and the nationalist right are growing in strength among voters. After three decades in which apostles of financial deregulation, offshoring and immigration liberalization dominated the capitals of major Western countries, the pendulum is swinging in the other direction.
You would never know this from the prestige press, which is owned by billionaires and populated by upscale journalists, many of whom were able to begin their journalistic careers as unpaid interns thanks to affluent parents. According to the consensus in the elite media, history runs in one direction toward the merger of national economies in a single global free market, the elimination of borders for labor and the relaxation of restrictions on the free movement of capital. Any moves in the opposite direction represent dangerous backsliding that can only be motivated by racism and xenophobia and that threaten to produce new Hitlers and Mussolinis and trade wars leading to world wars.
But the voters of the industrial democracies are not listening to the elite transatlantic chattering class. The late political scientist Samuel Huntington coined the term “Davos Man,” after the World Economic Forum at Davos, Switzerland, to symbolize the post-national, anti-populist global elite. Davos Man still exists, but he is in danger of going the way of Neanderthal Man. The Davos vision of a dawning post-national free market utopia was cracked by the al-Qaida attacks on Sept. 11, 2001, and then shattered by the global financial crash of 2008. Free market globalism continues to be the orthodoxy in elite economic and journalistic circles, but in politics it has been in retreat for years. It is increasingly clear that libertarian globalism was never the wave of the future, but merely a temporary blip in history between the fall of the Berlin Wall in 1989 and the fall of the twin towers in 2001.
Consider the case of immigration policy. In every advanced nation, including the United States, governments under pressure from voters have moved to tighten up surveillance and control of immigrants, for reasons of national security and protection of the wages and cultures of their citizens from real or imagined threats. Parties of the center-left as well as of the center-right have adopted positions on immigration that would have been considered far-right in the globalist 1990s. America’s Democrats and the Labour Party of Gordon Brown have been forced by voter sentiments to carry out tough immigration policies that elite pundits of the left, right and center have denounced to no effect.
In the world economy, the major trend of our time is the rise of nationalist state capitalism, not the disappearance of national economic boundaries that was predicted by the prophets of globalization like Thomas Friedman following the end of the Cold War. When the world economy collapsed in 2008, leading industrial countries rushed to bail out national firms like America’s GM and Germany’s Opel, giving the lie to the claim that major corporations no longer had national identities. Instead of liberalizing its economy as it developed, China has made its state-owned companies more rather than less important. Most of the world’s energy companies, and a number of major shipping and aerospace industries, are state-controlled. The response in the U.S. has been growing economic nationalism, which is tapped by presidential candidates like Obama and Romney who call for defending and promoting American industry — at least when they are running for office.
It is true that protectionist policies have been limited during the Great Recession, compared to the Great Depression of the 1930s. But this arguably reflects the interests of working-class voters rather than the triumph of libertarian globalist ideology. A dwindling majority of wage earners in advanced industrial countries work in manufacturing industries that can be offshored to other countries. Most work in the nontraded domestic service sector. Only a few of them need to worry that their jobs will be sent abroad, but it is rational for many to worry about immigrant competition within their own countries for local service sector jobs. At the same time, the working class in Western democracies benefits from low prices for imports. It is perfectly rational, therefore, for working-class Americans or Europeans to be more concerned about immigrant competition than about trade. On another front, the deregulation of finance, the centerpiece of Clinton Treasury Secretary Robert Rubin’s global economic strategy, is being slowly but inevitably reversed, in the aftermath of the global crisis to which financial deregulation contributed. Unwilling to wait for global agreement on financial regulation, nations are unilaterally re-regulating the financial industry within their own borders. The result will be to reverse much of the financial globalization of recent decades and replace it with a patchwork of different national financial systems.
The Balkanization of global finance along national lines will be accelerated in the decades to come as many governments choose to deploy moderate inflation to burn away much of the public and private debt built up during the Great Recession, as the alternative to politically unpopular spending cuts and tax increases. What is known as “financial repression” — forcing national banks and, through them, national savers to accept government bonds whose value is being eroded by deliberate inflation — is a policy that is helped by a degree of segregation of national banking systems from the world economy. In the future, countries pursuing debt reduction by means of moderate inflation will find it attractive to partly re-nationalize their financial systems for this purpose alone. Most retirees in advanced industrial nations depend primarily for their retirement income on inflation-adjusted public pensions like Social Security, not on private savings. As a result, financial repression will hurt economic elites the most, while doing little harm to the working-class majorities in the U.S., Canada and Europe. Even as nationalism further fragments the global economy along national and regional lines, populism will redraw the map of domestic politics in one country after another, including the United States. Nationalist populists who break with the elite libertarian consensus, even those who, like Ross Perot, are centrist rather than far-right, are routinely demonized by the pundits of the mainstream press, whose moderate libertarian orthodoxy reflects the values and class interests of the owners of the media. But while populist outsiders are marginalized in the media and usually fail at the ballot box, their issues are often co-opted by mainstream conservative and progressive parties, the way that populist opposition to illegal immigration has been co-opted by establishment parties throughout the West in the last decade.
Votes clearly count, even in plutocratic America. If American public policy reflected the objectives of the 1 percent, then long ago there would have been relaxation of border enforcement and amnesties for illegal immigrants, the privatization or means-testing of Social Security and Medicare and further deregulation of finance. On all of these issues, however, the oligarchic consensus is losing at the ballot box, if not in the editorial pages.
Davos Man is not dead, but he is on life support. The libertarian globalist moment in world history is over. Free market globalism peaked in the late 1990s, before the rise of al-Qaida and Chinese-style state capitalism, when it appeared briefly that the Reagan-Thatcher version of capitalism represented the future. Most of our politicians and pundits are still living in the mental world of the 1980s and 1990s, but the future has arrived and it is not what libertarian globalists predicted.
Here and there, trade and immigration liberalization will continue, when it serves the interests of particular nations or particular pressure groups. And it will always be important, even in a partly renationalized world, to resist nativist bigotry and misguided forms of protectionism. Even so, the fading vision of inevitable progress toward the free flow of money, goods and labor across national boundaries was never anything more than a utopian fantasy, like the Marxist dream of international fraternity in a socialist world. Capitalism in some form, partly private and partly statist, will endure. But less than a generation after the fall of the Berlin Wall, libertarian globalism has joined communism on the dust heap of history.
This originally appeared on Robert Reich's
blog.
Who should have the primary strategic responsibility for making American workers globally competitive – the private sector or government? This will be a defining issue in the 2012 campaign.
In his State of the Union address, President Obama will make the case that government has a vital role. His Republican rivals disagree. Mitt Romney charges the president is putting “free enterprise on trial,” while Newt Gingrich merely fulminates about “liberal elites.”
American business won’t and can’t lead the way to more and better jobs in the United States. First, the private sector is increasingly global, with less and less stake in America. Second, it’s driven by the necessity of creating profits, not better jobs.
The National Science Foundation has just released its biennial report on global investment in science, engineering and technology. The NSF warns that the United States is quickly losing ground to Asia, especially to China. America’s share of global R&D spending is tumbling. In the decade to 2009, it dropped from 38 percent to 31 percent, while Asia’s share rose from 24 to 35 percent.
One big reason: According to the NSF, American firms nearly doubled their R&D investment in Asia over these years, to over $7.5 billion.
GE recently announced a $500 million expansion of its R&D facilities in China. The firm has already invested $2 billion.
GE’s CEO Jeffrey Immelt chairs Obama’s council on work and competitiveness. I’d wager that as an American citizen, Immelt is concerned about working Americans. But as CEO of GE, Immelt’s job is to be concerned about GE’s shareholders. They aren’t the same.
GE has also been creating more jobs outside the United States than in it. A decade ago, fewer than half of GE’s employees were non-American; today, 54 percent are.
This is all good for GE and its shareholders, but it’s not necessarily good for America or American workers. The Commerce Department says U.S. based global corporations added 2.4 million workers abroad in first decade of 21st century, while cutting their U.S. workforce by 2.9 million.
According to the New York Times, Apple Computer employs 43,000 people in the United States but contracts with over 700,000 workers abroad. It makes iPhones in China not only because of low wages there but also the ease and speed with which its Chinese contractor can mobilize their workers – from company dormitories at almost any hour of the day or night.
An Apple executive says “We don’t have an obligation to solve America’s problems. Our only obligation is making the best product possible.” He might have added “and showing a big enough profits to continually increase our share price.”
Most executives of American companies agree. If they can make it best and cheapest in China, or anywhere else, that’s where it will be made. Don’t blame them. That’s what they’re getting paid to do.
What they want in America is lower corporate taxes, less regulation and fewer unionized workers. But none of these will bring good jobs to America. These steps may lower the costs of production here, but global companies can always find even lower costs abroad.
Global corporations — wherever they’re based — will create good jobs for Americans only if Americans are productive enough to summon them. Problem is, a large and growing portion of our workforce isn’t equipped to be productive.
Put simply, American workers are hobbled by deteriorating schools, unaffordable college tuitions, decaying infrastructure and declining basic R&D. All of this is putting us on a glide path toward even lousier jobs and lower wages.
Get it? The strategic responsibility for making Americans more globally competitive can’t be centered in the private sector because the private sector is rapidly going global, and it’s designed to make profits rather than good jobs. The core responsibility has to be in government because government is supposed to be looking out for the public, and investing in public schools, colleges, infrastructure and basic R&D.
But here’s the political problem. American firms have huge clout in Washington. They maintain legions of lobbyists and are pouring boatloads of money into political campaigns. After the Supreme Court’s Citizen’s United decision, there’s no limit.
Who represents the American workforce? Organized labor represents fewer than 7 percent of private-sector workers and has all it can do to protect a dwindling number of unionized jobs.
Republicans like it this way, and for three decades have been trying to convince average working Americans government is their enemy. Yet corporate America isn’t their friend. Without bold government action on behalf of our workforce, good American jobs will continue to disappear.
For those looking for signs of how globalization has woven the world into a web of unexpected vulnerability, 2011 offered a bumper crop.
An earthquake in Japan sent the global auto manufacturing industry into a conniption.
A flood in Thailand drastically reduced supplies of computer hard drives, forcing even a titan like Intel to swiftly reduce revenue forecasts.
State-subsidized solar panel production in China crushed a U.S.-subsidized solar start-up, thereby igniting a Washington political scandal.
It is child’s play to find further examples. The underlying reality is that unexpected consequences make everyone nervous. Sensibilities are on hair trigger. Just two weeks ago, the New York Times captured the new jitteriness in a single quote. In a story reporting how U.S. stock traders were increasingly setting their alarm clocks for the middle of the night, in order to absorb the latest news from Europe as soon as it started to break, one stock analyst, Michael Mayo, complains in a tone of bemused wonder: “Who would have thought we would have to be looking at Italian sovereign debt yields to figure out what Morgan Stanley’s stock will do?”
For those who haven’t been living and dying on every twist and turn of the European financial crisis, some unpacking of that sentence may be in order. Most modern governments routinely auction some form of state-backed bonds or other securities in order to raise cash. If the bond investors aren’t excited about the opportunity — let’s suppose, just for argument’s sake, that they’re afraid the Italian economy is about to collapse — then Italy must offer a higher interest rate, or yield, on those bonds to attract buyers. The higher the yield, the more negative the bond market’s judgment is assumed to be.
But for most of November and December, the health of Italy’s debt sales became not merely a judgment on Italy’s economic health and fiscal stability, but a swiftly translated proxy for investor sentiment about the state of all Europe. If Italy ran into real trouble, so the theory went, France and Germany would soon be swept into the vortex. And a European recession would obviously be bad news for the rest of the world. So one unsuccessful auction in Rome becomes immediate cause for bearish sentiment in New York and Tokyo and Shanghai.
And no one wants to be caught more than one nanosecond out of the loop. If the orders go out to sell or buy, you want to get there first. Since now, more than ever, bad news travels fast, everyone’s got to be quick on the trigger.
It doesn’t seem healthy, but we’re going to have to get used to it. Volatility and vulnerability are built into the infrastructure of our modern world. The jury may still out on the chaos theory question of whether a single butterfly flapping its wings in Botswana can cause a typhoon in the Philippines, but we now know without a shadow of a doubt that the relative success or failure of a troubled European government’s attempt to raise cash can send instant shock waves across financial markets across the globe.
And we know, intimately, that it doesn’t take much to set off a cascade of trouble — after the great global crash of 2008, traders everywhere are in a state of permanent PTSD. Beyond the obvious surface connections between markets — that European recession slowing U.S. economic growth — there are abundant linkages beneath the scenes that are obscure and hard to unravel, interconnections woven by complex derivatives and hedging strategies and computer-driven high-speed trading algorithms that instantly translate woe in one market to panic in another.
The inescapable conclusion: Our modern high-tech markets, in which more money than ever before swirls around the globe in a blink of an eye, are better at transmitting panic and fear than anything heretofore created by humans. If civilization is supposed to imply progress, then something has gone very awry: In the second decade of the 21st century, our infrastructure is increasingly fragile, increasingly prone to disruption. The sword of Damocles hangs above everyone’s head, and the thread that keeps it from falling is fraying perilously thin.
What is perhaps most fascinating about this state of affairs is how it has arisen as a consequence of global capital’s relentless quest for lower operating costs and greater efficiency and flexibility. The better we get at extending supply and production chains across the globe, the more vulnerable those chains become to a disruption at any given point. The faster we enable the transmission of information around the world and through the financial markets, the more volatile those markets become, as every new headline sends a different trading signal.
The marvelous shipping ports of the West Coast, able to transport unthinkable quantities of goods from ship to train or truck via their state-of-the-art cranes, offer a perfect example. We’ve never been so good at moving stuff around. But shut down one of those ports for a week, and we’re suddenly stuck. There’s nowhere else for all that stuff to go!
We’re going to see more of this in the future, rather than less. Climate disruptions will increase in frequency and severity, influencing commodity prices and immigration flows and insurance-industry profit margins. Higher prices for fossil fuels will complicate those transportation logistics — a single shock in Saudi Arabia would blast through economies everywhere. The temptation to hit the panic button will become increasingly irresistible.
Our systems need more redundancy, and our temperament would benefit from a heaping dose of prudence. But it’s hard to see where the encouragement to change our ways will come from. Because if there’s one thing that’s even more clear than the emergence of a constantly-on-the-verge-of-a-nervous-breakdown global economy, it’s that, for the most part, our political systems are not up to the task of dealing with these challenges.
Which, of course, just increases our overall sense of antsy powerlessness. As individuals, we’ve never been so much at the mercy of events that play out thousands of miles away, and we are remarkably unable to do anything about it.
And here comes 2012, which will witness a U.S. presidential election, crunch time for the European fiscal union, a potentially slowing Chinese economy, more weather disruptions, and a whole bunch of stuff that we have no idea is coming. If 2011 was the year when globalization’s downside became impossible to ignore, then 2012 will likely raise the ante by another order of magnitude.
In every aspect of human existence, change is a constant. Yet change that actually matters occurs only rarely. Even then, except in retrospect, genuinely transformative change is difficult to identify. By attributing cosmic significance to every novelty and declaring every unexpected event a revolution, self-assigned interpreters of the contemporary scene — politicians and pundits above all — exacerbate the problem of distinguishing between the trivial and the non-trivial.
Did 9/11 “change everything”? For a brief period after September 2001, the answer to that question seemed self-evident: of course it did, with massive and irrevocable implications. A mere decade later, the verdict appears less clear. Today, the vast majority of Americans live their lives as if the events of 9/11 had never occurred. When it comes to leaving a mark on the American way of life, the likes of Steve Jobs and Mark Zuckerberg have long since eclipsed Osama bin Laden. (Whether the legacies of Jobs and Zuckerberg will prove other than transitory also remains to be seen.)
Anyone claiming to divine the existence of genuinely Big Change Happening Now should, therefore, do so with a sense of modesty and circumspection, recognizing the possibility that unfolding events may reveal a different story.
All that said, the present moment is arguably one in which the international order is, in fact, undergoing a fundamental transformation. The “postwar world” brought into existence as a consequence of World War II is coming to an end. A major redistribution of global power is underway. Arrangements that once conferred immense prerogatives upon the United States, hugely benefiting the American people, are coming undone.
In Washington, meanwhile, a hidebound governing class pretends that none of this is happening, stubbornly insisting that it’s still 1945 with the so-called American Century destined to continue for several centuries more (reflecting, of course, God’s express intentions).
Here lies the most disturbing aspect of contemporary American politics, worse even than rampant dysfunction borne of petty partisanship or corruption expressed in the buying and selling of influence. Confronted with evidence of a radically changing environment, those holding (or aspiring to) positions of influence simply turn a blind eye, refusing even to begin to adjust to a new reality.
Big Change Happening Now
The Big Change happening before our very eyes is political, economic and military. At least four converging vectors are involved.
First, the Collapse of the Freedom Agenda: In the wake of 9/11, the administration of George W. Bush set out to remake the Greater Middle East. This was the ultimate strategic objective of Bush’s “global war on terror.”
Intent on accomplishing across the Islamic world what he believed the United States had accomplished in Europe and the Pacific between 1941 and 1945, Bush sought to erect a new order conducive to U.S. interests — one that would permit unhindered access to oil and other resources, dry up the sources of violent Islamic radicalism, and (not incidentally) allow Israel a free hand in the region. Key to the success of this effort would be the U.S. military, which President Bush (and many ordinary Americans) believed to be unstoppable and invincible — able to beat anyone anywhere under any conditions.
Alas, once implemented, the Freedom Agenda almost immediately foundered in Iraq. The Bush administration had expected Operation Iraqi Freedom to be a short, tidy war with a decisively triumphant outcome. In the event, it turned out to be a long, dirty (and very costly) war yielding, at best, exceedingly ambiguous results.
Well before he left office in January 2009, President Bush himself had abandoned his Freedom Agenda, albeit without acknowledging its collapse and therefore without instructing Americans on the implications of that failure. One specific implication stands out: we now know that U.S. military power, however imposing, falls well short of enabling the United States to impose its will on the Greater Middle East. We can neither liberate nor dominate nor tame the Islamic world, a verdict from the Bush era that Barack Obama’s continuing misadventures in “AfPak” have only served to affirm.
Trying harder won’t produce a different result. Outgoing Secretary of Defense Robert Gates caught the new reality best: “Any future defense secretary who advises the president to again send a big American land army into Asia or into the Middle East or Africa should ‘have his head examined,’ as General MacArthur so delicately put it.”
To be sure, Freedom Agenda dead-enders — frequently found under K in your phone book — continue to argue otherwise. Even now, for example, Kagans, Keanes, Krauthammers and Kristols are insisting that “we won” the Iraq War — or at least had done so until President Obama fecklessly flung away a victory so gloriously gained. Essential to their argument is that no one notice how they have progressively lowered the bar defining victory.
Back in 2003, they were touting Saddam Hussein’s overthrow as just the beginning of American domination of the Middle East. Today, with Saddam’s departure said to have “made the world a better place,” getting out of Baghdad with U.S. forces intact has become the operative definition of success, ostensibly vindicating the many thousands killed and maimed, millions of refugees displaced, and trillions of dollars expended.
Meanwhile, al-Qaeda in Mesopotamia remains in the field, conducting some 30 attacks per week against Iraqi security forces and civilians. This we are expected not to notice. Some victory.
Second, the Great Recession: In the history of the American political economy, the bursting of speculative bubbles forms a recurring theme. Wall Street shenanigans that leave the plain folk footing the bill are an oft-told tale. Recessions of one size or another occur at least once a decade.
Yet the economic downturn that began in 2008 stands apart, distinguished by its severity, duration and resistance to even the most vigorous (or extravagant) remedial action. In this sense, rather than resembling any of the garden-variety economic slumps or panics of the past half-century, the Great Recession of our own day recalls the Great Depression of the 1930s.
Instead of being a transitory phenomenon, it seemingly signifies something transformational. The Great Recession may well have inaugurated a new era — its length indeterminate but likely to stretch for many years — of low growth, high unemployment and shrinking opportunity. As incomes stagnate and more and more youngsters complete their education only to find no jobs waiting, members of the middle class are beginning to realize that the myth of America as a classless society is just that. In truth, the game is rigged to benefit the few at the expense of the many — and in recent years, the fixing has become ever more shamelessly blatant.
This realization is rattling American politics. In just a handful of years, confidence in the Washington establishment has declined precipitously. Congress has become a laughingstock. The high hopes raised by President Obama’s election have long since dissipated, leaving disappointment and cynicism in their wake.
One result, on both the far right and the far left, has been to stoke the long-banked fires of American radicalism. The energy in American politics today lies with the Tea Party Movement and Occupy Wall Street, both expressing a deep-seated antipathy toward the old way of doing things. Populism is making one of its periodic appearances on the American scene.
Where this will lead remains, at present, unclear. But ours has long been a political system based on expectations of ever-increasing material abundance, promising more for everyone. Whether that system can successfully deal with the challenges of managing scarcity and distributing sacrifice ranks as an open question. This is especially true when those among us who have been making out like bandits profess so little willingness to share in any sacrifices that may be required.
Third, the Arab Spring: As with the floundering American economy, so with Middle Eastern politics: predicting the future is a proposition fraught with risk. Yet without pretending to forecast outcomes — Will Tunisia, Egypt and Libya embrace democracy? Can Islamic movements coexist with secularized modernity? — this much can be safely said: the ongoing Arab upheaval is sweeping from that region of the world the last vestiges of Western imperialism.
Europeans created the modern Middle East with a single purpose in mind: to serve European interests. With the waning of European power in the wake of World War II, the United States — gingerly at first, but by the 1980s without noticeable inhibition — stepped in to fill the void. What had previously been largely a British sphere now became largely an American one, with the ever-accelerating tempo of U.S. military activism testifying to that fact.
Although Washington abjured the overt colonialism once practiced in London, its policies did not differ materially from those that Europeans had pursued. The idea was to keep a lid on, exclude mischief-makers, and at the same time extract from the Middle East whatever it had on offer. The preferred American MO was to align with authoritarian regimes, offering arms, security guarantees and other blandishments in return for promises of behavior consistent with Washington’s preferences. Concern for the wellbeing of peoples living in the region (Israelis excepted) never figured as more than an afterthought.
What events of the past year have made evident is this: that lid is now off and there is little the United States (or anyone else) can do to reinstall it. A great exercise in Arab self-determination has begun. Arabs (and, arguably, non-Arabs in the broader Muslim world as well) will decide their own future in their own way. What they decide may be wise or foolish. Regardless, the United States and other Western nations will have little alternative but to accept the outcome and deal with the consequences, whatever they happen to be.
A Washington inhabited by people certain that decisions made in the White House determine the course of history will insist otherwise, of course. Democrats credit Obama’s 2009 Cairo speech with inspiring Arabs to throw off their chains. Even more laughably, Republicans credit George W. Bush’s “liberation” of Iraq for installing democracy in the region and supposedly moving Tunisians, Egyptians and others to follow suit. To put it mildly, evidence to support such claims simply does not exist. One might as well attribute the Arab uprising to the 2010 Deepwater Horizon oil spill in the Gulf of Mexico. Those expecting Egyptians to erect statues of Obama or Bush in Cairo’s Tahrir Square are likely to have a long wait.
Fourth, Beleaguered Europe’s Quest for a Lifeline: To a considerable extent, the story of the twentieth-century — at least the commonly-told Western version of that story — is one of Europe screwing up and America coming to the rescue. The really big screw-ups were, of course, the two world wars. In 1917 and again after December 1941, the United States sent large armies to deal with those who had disturbed the peace. After the first war, the Americans left. After the second, they stayed, not only providing soldiers to safeguard Western Europe, but also rejuvenating the shattered economies of the European democracies.
Even with the passing of a half-century, the Marshall Plan stands out as a singular example of enlightened statecraft — and also as a testimonial to America’s unsurpassed economic capacity following World War II. Saving continents in dire distress was a job that only the United States could accomplish.
That was then. Today, Europe has once again screwed up, although fortunately this time there is no need for foreign armies to sort out the mess. The crisis of the moment is an economic one, due entirely to European recklessness and irresponsibility (not qualitatively different from the behavior underlying the American economic crisis).
Will Uncle Sam once again ride to the rescue? Not a chance. Beset with the problems that come with old age, Uncle Sam can’t even mount up. To whom, then, can Europe turn for assistance? Recent headlines tell the story:
- “Cash-Strapped Europe Looks to China For Help”
- “Europe Begs China for Bailout”
- “EU takes begging bowl to Beijing”
- “Is China the Bailout Saviour in the European Debt Crisis?”
The crucial issue here isn’t whether Beijing will actually pull Europe’s bacon out of the fire. Rather it’s the shifting expectations underlying the moment. After all, hasn’t the role of European savior already been assigned? Isn’t it supposed to be Washington’s in perpetuity? Apparently not.
Back to the Future
In the words of the old Buffalo Springfield song: “Something’s happening here. What it is ain’t exactly clear.”
American politicians stubbornly beg to differ, of course, content to recite vapid but reassuring clichés about American global leadership, American exceptionalism and that never-ending American Century. Everything, they would have us believe, will remain just as it has been — providing the electorate installs the right person in the Oval Office.
“To those nations who continue to resist the unstoppable march of human, political and economic freedom,” declares Republican presidential candidate Jon Huntsman, “we will make clear that they are on the wrong side of history, by ensuring that America’s light shines bright in every corner of the globe, representing a beacon of hope and inspiration.”
“This is America’s moment,” insists Mitt Romney. “We should embrace the challenge, not shrink from it, not crawl into an isolationist shell, not wave the white flag of surrender, nor give in to those who assert America’s time has passed…. I will not surrender America’s role in the world.” With an unsurprising absence of originality, the title of Romney’s campaign “white paper” on national security is “An American Century.”
Governor Rick Perry’s campaign web site offers this important insight: “Rick Perry believes in American exceptionalism, and rejects the notion our president should apologize for our country but instead believes allies and adversaries alike must know that America seeks peace from a position of strength.”
For his part, Newt Gingrich wants it known that “America is still the last, best hope of mankind on earth.”
The other Republican candidates (Ron Paul always excepted) draw from the same shallow and stagnant pool of ideas. To judge by what we might call the C. Wright Mills standard of leadership — “men without lively imagination are needed to execute policies without imagination devised by an elite without imagination” — all are eminently qualified for the presidency. Nothing is wrong with America or the world, they would have us believe, that can’t be fixed by ousting Barack Obama from office, thereby restoring the rightful order of things.
“Is America Over?” That question adorns the cover of the latest issue of Foreign Affairs, premier organ of the foreign policy establishment. As is typically the case with that establishment, Foreign Affairs is posing the wrong question, one designed chiefly to elicit a misleading, if broadly reassuring answer.
Proclaim it from the rooftops: No, America is not “over.” Yet a growing accumulation of evidence suggests that America today is not the America of 1945. Nor does the international order of the present moment bear more than a passing resemblance to that which existed in the heyday of American power. Everyone else on the planet understands this. Perhaps it’s finally time for Americans — starting with American politicians — to do so as well. Should they refuse, a painful comeuppance awaits.
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Robert Rubin (Credit: AP/Cliff Owen) 
(Credit: AP) 
Italian equities shape American realities (Credit: Tony Gentile / Reuters) 
Barack Obama, Moammar Gadhafi and George Papandreou (Credit: AP) 
(Credit: AP/Mary Altaffer) 
