The story goes that Milton Friedman was once taken to see a massive government project somewhere in Asia. Thousands of workers using shovels were building a canal. Friedman was puzzled. Why weren’t there any excavators or any mechanized earth-moving equipment? A government official explained that using shovels created more jobs. Friedman’s response: “Then why not use spoons instead of shovels?”
That story came to mind last week when President Obama linked technology to job losses. “There are some structural issues with our economy where a lot of businesses have learned to become much more efficient with a lot fewer workers,” he said. “You see it when 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.”
The president calls this a structural issue—we usually call it progress. And it isn’t exactly a new phenomenon. It’s been going on for centuries, and its pace has accelerated over the past 50 years. Businesses relentlessly look for ways to replace workers with machines. The machines get better and smarter. We go from spoons to shovels to excavators, not the other way around.
Telephone switchboard operators lose jobs to automated switching. Toll collectors get replaced by E-ZPass. Auto workers get replaced by robots.
As Roberts noted:
It’s true, there are some structural issues in the labor market. New jobs are being created but not at the usual pace and not fast enough to soak up the unemployed. But President Obama is wrong to blame innovation. A bigger problem is housing, where hundreds of thousands of workers have lost their jobs. The source of that problem isn’t technology but an over-reaching housing policy and distorted finance. The solution is to let the housing market clear—let interest rates rise, stop subsidizing mortgages, and clean up the foreclosure mess. That would let housing starts return to something like normal.
The other challenge is simply confidence. Businesses aren’t hiring because they’re uneasy about the future. There’s no easy way to instill confidence, but we know how to kill it—create uncertainty about taxes and regulations. Reducing that uncertainty would certainly help.
In the meanwhile, enjoy the ATM machine and the kiosk at the airport with a clear conscience. Doing more with less is the road to prosperity. When confidence returns, even more Americans will share in the bounty from innovation.
Of course, for confidence to return, the average CEO of a high-profile internationally-known business has to know that he’s not likely to get raided by the federal government. Or lemonade stand owner, for that matter.
And since I’ve been meaning to link to this for a while now, here’s a video found at the Retronaut Website on the birth of the modern electronic banking system, at least in England. It’s also a reminder that while we think of the 1960s British counterculture via such films as Quadrophenia, Blowup, Austin Powers, and the videos of the Isle of the Wight Festivals, England’s answer to Woodstock, there had to be a dominant culture in place for there to be an counterculture.
At least prior to everyone in England deciding they wanted to live out A Clockwork Orange beginning in the next few years.