Where are all the jobs going? Lessons from the first Industrial Revolution and 150 years of pain.

In a world which is seeing a simultaneous increase in the capabilities of robots and artificial intelligence to do many factory and service sector jobs, and a significant increase in the world’s interconnected population, a natural question to ask is: “Are there enough good jobs to go around for everyone?”

To many people, particularly those who hold positions of power in government and industry, the answer is simple: “Yes, so long as our population is sufficiently educated to take advantage of the jobs that will emerge in the future.” This column suggests that this view is too simplistic and wrong.

Due to a collective amnesia and lack of historical awareness, this view forgets about the disastrous, multi-generational, consequences that rapid industrialisation had for the have nots, not just in societies that were experiencing industrialisation, but also for countries that did not industrialise at all.

The Industrial Revolution, starting in Great Britain, resulted in widespread pain and unemployment, followed by significant prosperity and a golden age for those countries that experienced it first. People who live in the developed world today have inherited a world that was built on an early mover advantage over the rest of the world and have forgotten the initial growing pains. We have a material quality of life that is perhaps the highest it has been in history. We are lucky. Few of us would chose to live in 1800, rather than in 2012.

This column goes back to the first Industrial Revolution, starting in 1776, and follows the impact of rapid changes in employment to people in the West and in the rest of the world to show why this second Industrial Revolution will be as uncomfortable a revolution as the first.

When the Scotsman Adam Smith was writing in 1776, co-inciding with the year of the US Declaration of Independence, he was describing a world that was on the cusp of industrialisation, with references to items such as nails being produced on a production line. Forty years later, in 1817, industrialisation was starting to accelerate, allowing David Ricardo to write about the comparative advantages of nations and how certain nations should engage in high value activities and other nations in low value activities. These two books (and arguably Karl Marx’s Capital in 1867, based on the 1848 The Communist Manifesto, which described the workings of capitalism for the first time) formed the intellectual basis of the interlinked concepts of industrialisation, capitalism and free trade.

When you read these books and novels of the time, it is clear that industrialisation was extremely painful for many people. Why? It made people who had previously been gainfully employed suddenly become unemployed. The 1811-1817 Luddite movement, now permanently synonymous with backwards thinking people, was a symptom of a serious social crisis. Millions of people moved from the countryside into the cities. In the countryside they had had farming, garden farming and cottage industry to sustain them economically. While life was no picnic, being evicted from your land and being forced to work in an early 19th century factory or being forced into prostitution was even worse. This process was not quick. It was not a brief recession, followed by years of prosperity. It lasted from the late 1700s to the end of the Second World War: over 150 years.

Europe was convulsed during this period by multiple revolutions and upheavals. The French Revolution, inspired by the French backed American Revolution, set the stage for the concept of nationalism with the rise of Napoleon Bonaparte. In 1848 multiple governments across Europe were toppled by revolutions. Many of these revolutions were caused by an influx of new ideas and a drop in the numbers of jobs. This process only accelerated towards the second half of the 19th century which saw millions of Europeans flee conditions at home to lives of hoped for prosperity in America, Canada, Argentina and eventually Australia. Life in Europe had become unbearable and the value of life had dropped with it. 19th century European factories were able to be so inhuman and awful because the products that they produced were so cheap that they destroyed all of the cottage industries and jobs that had previously existed, leaving people with few alternatives.

And this pain was for the successful, early industrialising countries. The rest of the world had it even worse: subjugation and colonisation.

China and India had had had the largest populations on Earth for a long time. In a pre industrial world, where there were few machines, there was a simple economic truth: if you had more people you could produce more things. The more things that you could produce the more wealthy you would be as an economy. China was a major manufacturing hub of the world and produced goods that were in significant demand in the West. When the Eastern Roman Empire’s capital Constantinople fell to the Turks in 1453, closing off the silk road to China, it set off a wave of innovation in Western Europe as city states and small countries tried to find a way to get back into the Chinese and Asian markets. Early adoption of cheap guns enabled these small European countries to dominate other wealthier and more populous countries with surprisingly few people. They used this power to control markets and purchase spices and manufactured goods, paid for by Latin American silver and gold (the Spanish and Portuguese empires), innovative corporate structures (the Dutch empire) and finally the sale of early manufactured goods (the British empire).

It was the final group, the British, which radically changed the lives of people living within India and China and then resulted in a military and political dominance over Africa (resources and slaves) and Asia (captive markets for industrialised products). Ricardo’s comparative advantage and Smith’s free trade crushed the spirit and the economies of the rest of the world. Britain and the industrialised west could produce products that were comparatively better and cheaper than those of their competition. When China refused to import any more products, worried about the destabilising impact of cheap western goods on their economy, the British and other western powers first forced opium into China (the Chinese did not want the manufactured goods) and then manufactured goods with the Unequal Treaties of the late 19th and early 20th centuries, which reduced China to a semi colonial status and forced them to lease Hong Kong and Macau.

So looking back in history, it is clear that the use of the word “revolution” in the context of Industrial Revolution does not refer to something warm and benign, but rather a violent convulsion which upset the global balance of power and the societies that lived through it.

So if increased automation, 3D printing (see previous column) and computerisation (see previous column) are forming the basis of a new Industrial Revolution which has the potential to be as radical as the first Industrial Revolution what are people and societies to do? The view that all a society needs to do is invest in education and things will be okay, is wrong and abandons a large chunk of society.

Why? Firstly, in any country there will be a standard mix of smart / hardworking people and stupid / lazy people. No matter how hard you try as a government to persuade companies otherwise, stupid / lazy people will always be less attractive to employers than smart / hardworking people. As companies can hire people from all over the world, they will rather pick smart / hardworking people from other countries than pick stupid / lazy people from their own country. So what happens to all of the stupid / lazy people? Just because you are stupid, or lazy, or both, should you be condemned to a life of misery and being unemployed? Education may help you move up a little in the employment pecking order but remember: we are all now competing with the entire planet’s population. This is a terrible outcome for you as an individual and just as destabilising for your country as a whole.

Secondly, a highly educated population does not create that many jobs, compared to what was available in primary and secondary industries and parts of the service industry. Google, Apple and Microsoft are great technological giants but hire relatively few people, even if you include people who work within their ecosystems. Foxconn, the Chinese manufacturing giant with over 480,000 employees, which produces goods for these three technology companies is a big employer today but even they are planning to automate thousands of jobs with robots.

So if education is no panacea, what are we to do? Stop free trade? Become autarchic? De-industrialise? Reduce computerisation and mechanisation? King Canute is famous because he sat on his throne and commanded the tide to not come up the beach. People today remember this part of the story and Canute is mocked, as of course he could not stop the tide from reaching up to his throne and wetting his clothes. They forget the beginning of the story, however. In this, Canute was so fed up with the flattery of all of his courtiers, who told him that anything that he commanded would come true, that it was he that decided to mock their flattery by telling them that he could turn back the tide.

Like Canute, in our story of the second Industrial Revolution, there is nothing that we can do to turn back this tide of innovation, automation and computerisation. In fact, our problems may be even worse. Unlike in the 19th century, we have no population release valve of an empty continent with a government that would welcome the huddled masses of people seeing their lives upturned by industrialisation.

We can only hope for a new New Colossus:

Not like the brazen giant of Greek fame,
With conquering limbs astride from land to land;
Here at our sea-washed, sunset gates shall stand
A mighty woman with a torch, whose flame
Is the imprisoned lightning, and her name
Mother of Exiles. From her beacon-hand
Glows world-wide welcome; her mild eyes command
The air-bridged harbor that twin cities frame.
“Keep, ancient lands, your storied pomp!” cries she
With silent lips. “Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tost to me,
I lift my lamp beside the golden door!”

In a later column we will explore options of how we many be able to harness the multiple benefits of technology change in a way that allows us to avoid the possible convulsions of a new Industrial Revolution.

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