THE CURSE OF MACHINERY
AMONG THE MOST viable of all economic delusions is the belief
that machines on net balance create unemployment. Destroyed
a thousand times, it has risen a thousand times out of its own
ashes as hardy and vigorous as ever. Whenever there is longcontinued
mass unemployment, machines get the blame anew.
This fallacy is still the basis of many labor union practices. The
public tolerates these practices because it either believes at
bottom that the unions are right, or is too confused to see just
why they are wrong.
The belief that machines cause unemployment, when held
with any logical consistency, leads to preposterous conclusions.
Not only must we be causing unemployment with every
technological improvement we make today, but primitive man
must have started causing it with the first efforts he made to
save himself from needless toil and sweat.
To go no further back, let us turn to Adam Smith's Wealth of
Nations, published in 1776. The first chapter of this remarkable
book is called "Of the Division of Labor," and on the second
page of this first chapter the author tells us that a workman
unacquainted with the use of machinery employed in pinmaking
"could scarce make one pin a day, and certainly could
not make twenty," but with the use of this machinery he can
make 4,800 pins a day. So already, alas, in Adam Smith's time,
machinery had thrown from 240 to 4.800 pin-makers out of
work for every one it kept. In the pin-making industry there
was already, if machines merely throw men out of jobs, 99.98
percent unemployment. Could things be blacker?
Things could be blacker, for the Industrial Revolution was
just in its infancy. Let us look at some of the incidents and
aspects of that revolution. Let us see, for example, what happened
in the stocking industry. New stocking frames as they
were introduced were destroyed by the handicraft workmen
(over 1,000 in a single riot), houses were burned, the inventors
were threatened and obliged to flee for their lives, and order
was not finally restored until the military had been called out
and the leading rioters had been either transported or hanged.
Now it is important to bear in mind that insofar as the rioters
were thinking of their own immediate or even longer futures
their opposition to the machine was rational. For William
Felkin, in his History of the Machine-Wrought Hosiery Manufactures
(1867), tells us (though the statement seems implausible) that
the larger part of the 50,000 English stocking knitters and their
families did not fully emerge from the hunger and misery
entailed by the introduction of the machine for the next forty
years. But insofar as the rioters believed, as most of them undoubtedly
did, that the machine was permanently displacing
men, they were mistaken, for before the end of the nineteenth
century the stocking industry was employing at least a hundred
men for every man it employed at the beginning of the century.
Arkwright invented his cotton-spinning machinery in 1760.
At that time it was estimated that there were in England 5,200
spinners using spinning wheels, and 2,700 weavers—in all,
7,900 persons engaged in the production of cotton textiles. The
introduction of Arkwright's invention was opposed on the
ground that it threatened the livelihood of the workers, and the
opposition had to be put down by force. Yet in 1787—twentyseven
years after the invention appeared—a parliamentary inquiry
showed that the number of persons actually engaged in
the spinning and weaving of cotton had risen from 7,900 to
320,000, an increase of 4,400 percent.
If the reader will consult such a book as Recent Economic
Changes, by David A.Wells, published in 1889, he will find
passages that, except for the dates and absolute amounts involved,
might have been written by our technophobes of today.
Let me quote a few:
During the ten years from 1870 to 1880, inclusive,
the British mercantile marine increased its movement,
in the matter of foreign entries and clearances
alone, to the extent of 22,000,000 tons . . . yet the
number of men who were employed in effecting this
great movement had decreased in 1880, as compared
with 1870, to the extent of about three thousand
(2,990 exactly). What did it? The introduction of
steam-hoisting machines and grain elevators upon
the wharves and docks, the employment of steam
power, etc. . . .
In 1873 Bessemer steel in England, where its price
had not been enhanced by protective duties, commanded
$80 per ton; in 1886 it was profitably manufactured
and sold in the same country for less than
$20 per ton. Within the same time the annual production
capacity of a Bessemer converter has been
increased fourfold, with no increase but rather a
diminution of the involved labor.
The power capacity already being exerted by the
steam engines of the world in existence and working
in the year 1887 has been estimated by the Bureau
of Statistics at Berlin as equivalent to that of
200,000,000 horses, representing approximately
1,000,000,000 men; or at least three times the working
population of the earth. . . .
One would think that this last figure would have caused Mr.
Wells to pause, and wonder why there was any employment
left in the world of 1889 at all; but he merely concluded, with
restrained pessimism, that "under such circumstances industrial
overproduction . . . may become chronic."
In the depression of 1932, the game of blaming unemploy-
ment on the machines started all over again. Within a few
months the doctrines of a group calling themselves the Technocrats
had spread through the country like a forest fire. I shall
not weary the reader with a recital of the fantastic figures put
forward by this group or with corrections to show what the real
facts were. It is enough to say that the Technocrats returned to
the error in all its native purity that machines permanently
displace men—except that, in their ignorance, they presented
this error as a new and revolutionary discovery of their own. It
was simply one more illustration of Santayana's aphorism that
those who cannot remember the past are condemned to repeat
it.
The Technocrats were finally laughed out of existence; but
their doctrine, which preceded them, lingers on. It is reflected
in hundreds of make-work rules and featherbed practices by
labor unions; and these rules and practices are tolerated and
even approved because of the confusion on this point in the
public mind.
Testifying on behalf of the United States Department of
Justice before the Temporary National Economic Committee
(better known as the TNEC) in March 1941, Corwin Edwards
cited innumerable examples of such practices. The electrical
union in New York City was charged with refusal to install
electrical equipment made outside of New York State unless
the equipment was disassembled and reassembled at the job
site. In Houston, Texas, master plumbers and the plumbing
union agreed that piping prefabricated for installation would be
installed by the union only if the thread were cut off one end of
the pipe and new thread were cut at the job site. Various locals
of the painters' union imposed restrictions on the use of
sprayguns, restrictions in many cases designed merely to make
work by requiring the slower process of applying paint with a
brush. A local of the teamsters' union required that every truck
entering the New York metropolitan area have a local driver in
addition to the driver already employed. In various cities the
electrical union required that if any temporary light or power
was to be used on a construction job there must be a full-time
maintenance electrician, who should not be permitted to do any
electrical construction work. This rule, according to Mr. Edwards,
"often involves the hiring of a man who spends his day
reading or playing solitaire and does nothing except throw a
switch at the beginning and end of the day."
One could go on to cite such make-work practices in many
other fields. In the railroad industry, the unions insist that
firemen be employed on types of locomotives that do not need
them. In the theaters unions insist on the use of scene shifters
even in plays in which no scenery is used. The musicians' union
required so-called stand-in musicians or even whole orchestras
to be employed in many cases where only phonograph records
were needed.
By 1961 there was no sign that the fallacy had died. Not only
union leaders but government officials talked solemnly of "automation"
as a major cause of unemployment. Automation was
discussed as if it were something entirely new in the world. It
was in fact merely a new name for continued technological
advance and further progress in labor-saving equipment.
But the opposition to labor-saving machinery, even today, is
not confined to economic illiterates. As late as 1970, a book
appeared by a writer so highly regarded that he has since
received the Nobel Prize in economics. His book opposed the
introduction of labor-saving machines in the underdeveloped
countries on the ground that they "decrease the demand for
labor"!1 The logical conclusion from this would be that the way
to maximize jobs is to make all labor as inefficient and unproductive
as possible. It implies that the English Luddite rioters,
who in the early nineteenth century destroyed stocking frames,
steam-power looms, and shearing machines, were after all
doing the right thing.
One might pile up mountains of figures to show how wrong1
1Gunnar Myrdal, The Challenge 4 World Poverty (NewYork: Pantheon
Books, 1970), pp. 400-401 and passim.
were the technophobes of the past. But it would do no good
unless we understood clearly why they were wrong. For statistics
and history are useless in economics unless accompanied by
a basic deductive understanding of the facts—which means in
this case an understanding of why the past consequences of the
introduction of machinery and other labor-saving devices had to
occur. Otherwise the technophobes will assert (as they do in
fact assert when you point out to them that the prophecies of
their predecessors turned out to be absurd): "That may have
been all very well in the past, but today conditions are fundamentally
different; and now we simply cannot afford to develop
any more labor-saving machines." Mrs. Eleanor Roosevelt,
indeed, in a syndicated newspaper column of September 19,
1945, wrote: "We have reached a point today where laborsaving
devices are good only when they do not throw the
worker out of his job."
If it were indeed true that the introduction of labor-saving
machinery is a cause of constantly mounting unemployment
and misery, the logical conclusions to be drawn would be
revolutionary, not only in the technical field but for our whole
concept of civilization. Not only should we have to regard all
further technical progress as a calamity; we should have to
regard all past technical progress with equal horror. Every day
each of us in his own activity is engaged in trying to reduce the
effort it requires to accomplish a given result. Each of us is
trying to save his own labor, to economize the means required
to achieve his ends. Every employer, small as well as large,
seeks constantly to gain his results more economically and
efficiently—that is, by saving labor. Every intelligent workman
tries to cut down the effort necessary to accomplish his
assigned job. The most ambitious of us try tirelessly to increase
the results we can achieve in a given number of hours. The
technophobes, if they were logical and consistent, would have
to dismiss all this progress and ingenuity as not only useless but
vicious. Why should freight be carried from Chicago to New
York by railroad when we could employ enormously more
men, for example, to carry it all on their backs?
Theories as false as this are never held with logical consis-
tency, but they do great harm because they are held at all. Let
us, therefore, try to see exactly what happens when technical
improvements and labor-saving machinery are introduced.
The details will vary in each instance, depending upon the
particular conditions that prevail in a given industry or period.
But we shall assume an example that involves the main possibilities.
Suppose a clothing manufacturer learns of a machine that
will make men's and women's overcoats for half as much labor
as previously. He installs the machines and drops half his labor
force.
This looks at first glance like a clear loss of employment. But
the machine itself required labor to make it; so here, as one
offset, are jobs that would not otherwise have existed. The
manufacturer, however, would have adopted the machine only
if it had either made better suits for half as much labor, or had
made the same kind of suits at a smaller cost. If we assume the
latter, we cannot assume that the amount of labor to make the
machines was as great in terms of payrolls as the amount of
labor that the clothing manufacturer hopes to save in the long
run by adopting the machine; otherwise there would have been
no economy, and he would not have adopted it.
So there is still a net loss of employment to be accounted for.
But we should at least keep in mind the real possibility that even
the first effect of the introduction of labor-saving machinery
may be to increase employment on net balance; because it is
usually only in the long run that the clothing manufacturer
expects to save money by adopting the machine: it may take
several years for the machine to "pay for itself."
After the machine has produced economies sufficient to
offset its cost, the clothing manufacturer has more profits than
before. (We shall assume that he merely sells his coats for the
same price as his competitors and makes no effort to undersell
them.) At this point, it may seem, labor has suffered a net loss
of employment, while it is only the manufacturer, the
capitalist, who has gained. But it is precisely out of these extra
profits that the subsequent social gains must come. The manufacturer
must use these extra profits in at least one of three
ways, and possibly he will use part of them in all three: (1) he
will use the extra profits to expand his operations by buying
more machines to make more coats; or (2) he will invest the
extra profits in some other industry; or (3) he will spend the
extra profits on increasing his own consumption. Whichever of
these three courses he takes, he will increase employment.
In other words, the manufacturer, as a result of his
economies, has profits that he did not have before. Every dollar
of the amount he has saved in direct wages to former coat
makers, he now has to pay out in indirect wages to the makers of
the new machine, or to the workers in another capital-using
industry, or to the makers of a new house or car for himself, or
for jewelry and furs for his wife. In any case (unless he is a
pointless hoarder) he gives indirectly as many jobs as he ceased
to give directly.
But the matter does not and cannot rest at this stage. If this
enterprising manufacturer effects great economies as compared
with his competitors, either he will begin to expand his operations
at their expense, or they will start buying the machines
too. Again more work will be given to the makers of the
machines. But competition and production will then also begin
to force down the price of overcoats. There will no longer be as
great profits for those who adopt the new machines. The rate of
profit of the manufacturers using the new machine will begin to
drop, while the manufacturers who have still not adopted the
machine may now make no profit at all. The savings, in other
words, will begin to be passed along to the buyers of
overcoats—to the consumers.
But as overcoats are now cheaper, more people will buy
them. This means that, though it takes fewer people to make
the same number of overcoats as before, more overcoats are
now being made than before. If the demand for overcoats is
what economists call "elastic" — that is, if a fall in the price of
overcoats causes a larger total amount of money to be spent on
overcoats than previously — then more people may be employed
even in making overcoats than before the new laborsaving
machine was introduced. We have already seen how this
actually happened historically with stockings and other textiles.
But the new employment does not depend on the elasticity of
demand for the particular product involved. Suppose that,
though the price of overcoats was almost cut in half—from a
former price, say, of $150 to a new price of $100—not a single
additional coat was sold. The result would be that while consumers
were as well provided with new overcoats as before,
each buyer would now have $50 left over that he would not
have had left over before. He will therefore spend this $50 for
something else, and so provide increased employment in other
lines.
In brief, on net balance machines, technological improvements,
automation, economies and efficiency do not throw
men out of work.
Not all inventions and discoveries, of course, are "laborsaving"
machines. Some of them, like precision instruments,
like nylon, lucite, plywood and plastics of all kinds, simply
improve the quality of products. Others, like the telephone or
the airplane, perform operations that direct human labor could
not perform at all. Still others bring into existence objects
and services, such as X-ray machines, radios, TV sets, airconditioners
and computers, that would otherwise not even
exist. But in the foregoing illustration we have taken precisely
the kind of machine that has been the special object of modern
technophobia.
It is possible, of course, to push too far the argument that
machines do not on net balance throw men out of work. It is
sometimes argued, for example, that machines create more jobs
than would otherwise have existed. Under certain conditions
this may be true. They can certainly create enormously more
jobs in particular trades. The eighteenth century figures for the
textile industries are a case in point. Their modern counterparts
are certainly no less striking. In 1910, 140,000 persons were
employed in the United States in the newly created automobile
industry. In 1920, as the product was improved and its cost
reduced, the industry employed 250,000. In 1930, as this
product improvement and cost reduction continued, employment
in the industry was 380,000. In 1973 it had risen to
941,000. By 973, 514,000 people were employed in making
aircraft and aircraft parts, and 393,000 were engaged in making
electronic components. So it has been in one newly created
trade after another, as the invention was improved and the cost
reduced.
There is also an absolute sense in which machines may be
said to have enormously increased the number of jobs. The
population of the world today is four times as great as in the
middle of the eighteenth century, before the Industrial Revolution
had got well under way. Machines may be said to have
given birth to this increased population; for without the
machines, the world would not have been able to support it.
Three out of every four of us, therefore, may be said to owe not
only our jobs but our very lives to machines.
Yet it is a misconception to think of the function or result of
machines as primarily one of creating jobs. The real result of the
machine is to increase production, to raise the standard of living,
to increase economic welfare. It is no trick to employ everybody,
even (or especially) in the most primitive economy. Full
employment—very full employment; long, weary, backbreaking
employment—is characteristic of precisely the nations
that are most retarded industrially. Where full employment
already exists, new machines, inventions and discoveries
cannot—until there has been time for an increase in
population—bring more employment. They are likely to bring
more unemployment (but this time I am speaking of voluntary
and not involuntary unemployment) because people can now
afford to work fewer hours, while children and the overaged no
longer need to work.
What machines do, to repeat, is to bring an increase in
production and an increase in the standard of living. They may
do this in either of two ways. They do it by making goods
cheaper for consumers (as in our illustration of the overcoats),
or they do it by increasing wages because they increase the
productivity of the workers. In other words, they either increase
money wages or, by reducing prices, they increase the
goods and services that the same money wages will buy. Sometimes
they do both. What actually happens will depend in large
part upon the monetary policy pursued in a country. But in any
case, machines, inventions and discoveries increase real wages.
A warning is necessary before we leave this subject. It was
precisely the great merit of the classical economists that they
looked for secondary consequences, that they were concerned
with the effects of a given economic policy or development in
the long run and on the whole community. But it was also their
defect that, in taking the long view and the broad view, they
sometimes neglected to take also the short view and the narrow
view. They were too often inclined to minimize or to forget
altogether the immediate effects of developments on special
groups. We have seen, for example, that many of the English
stocking knitters suffered real tragedies as a result of the introduction
of the new stocking frames, one of the earliest inventions
of the Industrial Revolution.
But such facts and their modern counterparts have led some
writers to the opposite extreme of looking only at the immediate
effects on certain groups. Joe Smith is thrown out of a job by
the introduction of some new machine. "Keep your eye on Joe
Smith," these writers insist. "Never lose track of Joe Smith."
But what they then proceed to do is to keep their eyes only on
Joe Smith, and to forget Tom Jones, who has just got a new job
in making the new machine, and Ted Brown, who has just got a
job operating one, and Daisy Miller, who can now buy a coat
for half what it used to cost her. And because they think only of
Joe Smith, they end by advocating reactionary and nonsensical
policies.
Yes, we should keep at least one eye on Joe Smith. He has
been thrown out of a job by the new machine. Perhaps he can
soon get another job, even a better one. But perhaps, also, he
has devoted many years of his life to acquiring and improving a
special skill for which the market no longer has any use. He has
lost this investment in himself, in his old skill, just as his former
employer, perhaps, has lost his investment in old machines or
processes suddenly rendered obsolete. He was a skilled workman,
and paid as a skilled workman. Now he has become
overnight an unskilled workman again, and can hope, for the
present, only for the wages of an unskilled workman, because
the one skill he had is no longer needed. We cannot and must
not forget Joe Smith. His is one of the personal tragedies that,
as we shall see, are incident to nearly all industrial and
economic progress.
To ask precisely what course we should follow with Joe
Smith—whether we should let him make his own adjustment,
give him separation pay or unemployment compensation, put
him on relief, or train him at government expense for a new
job--would carry us beyond the point that we are here trying to
illustrate. The central lesson is that we should try to see all the
main consequences of any economic policy or developmentthe
immediate effects on special groups, and the long-run effects
on all groups.
If we have devoted considerable space to this issue, it is
because our conclusions 'regarding the effects of new machinery,
inventions and discoveries on employment, production
and welfare are crucial. If we are wrong about these, there are
few things in economics about which we are likely to be right.
AMONG THE MOST viable of all economic delusions is the belief
that machines on net balance create unemployment. Destroyed
a thousand times, it has risen a thousand times out of its own
ashes as hardy and vigorous as ever. Whenever there is longcontinued
mass unemployment, machines get the blame anew.
This fallacy is still the basis of many labor union practices. The
public tolerates these practices because it either believes at
bottom that the unions are right, or is too confused to see just
why they are wrong.
The belief that machines cause unemployment, when held
with any logical consistency, leads to preposterous conclusions.
Not only must we be causing unemployment with every
technological improvement we make today, but primitive man
must have started causing it with the first efforts he made to
save himself from needless toil and sweat.
To go no further back, let us turn to Adam Smith's Wealth of
Nations, published in 1776. The first chapter of this remarkable
book is called "Of the Division of Labor," and on the second
page of this first chapter the author tells us that a workman
unacquainted with the use of machinery employed in pinmaking
"could scarce make one pin a day, and certainly could
not make twenty," but with the use of this machinery he can
make 4,800 pins a day. So already, alas, in Adam Smith's time,
machinery had thrown from 240 to 4.800 pin-makers out of
work for every one it kept. In the pin-making industry there
was already, if machines merely throw men out of jobs, 99.98
percent unemployment. Could things be blacker?
Things could be blacker, for the Industrial Revolution was
just in its infancy. Let us look at some of the incidents and
aspects of that revolution. Let us see, for example, what happened
in the stocking industry. New stocking frames as they
were introduced were destroyed by the handicraft workmen
(over 1,000 in a single riot), houses were burned, the inventors
were threatened and obliged to flee for their lives, and order
was not finally restored until the military had been called out
and the leading rioters had been either transported or hanged.
Now it is important to bear in mind that insofar as the rioters
were thinking of their own immediate or even longer futures
their opposition to the machine was rational. For William
Felkin, in his History of the Machine-Wrought Hosiery Manufactures
(1867), tells us (though the statement seems implausible) that
the larger part of the 50,000 English stocking knitters and their
families did not fully emerge from the hunger and misery
entailed by the introduction of the machine for the next forty
years. But insofar as the rioters believed, as most of them undoubtedly
did, that the machine was permanently displacing
men, they were mistaken, for before the end of the nineteenth
century the stocking industry was employing at least a hundred
men for every man it employed at the beginning of the century.
Arkwright invented his cotton-spinning machinery in 1760.
At that time it was estimated that there were in England 5,200
spinners using spinning wheels, and 2,700 weavers—in all,
7,900 persons engaged in the production of cotton textiles. The
introduction of Arkwright's invention was opposed on the
ground that it threatened the livelihood of the workers, and the
opposition had to be put down by force. Yet in 1787—twentyseven
years after the invention appeared—a parliamentary inquiry
showed that the number of persons actually engaged in
the spinning and weaving of cotton had risen from 7,900 to
320,000, an increase of 4,400 percent.
If the reader will consult such a book as Recent Economic
Changes, by David A.Wells, published in 1889, he will find
passages that, except for the dates and absolute amounts involved,
might have been written by our technophobes of today.
Let me quote a few:
During the ten years from 1870 to 1880, inclusive,
the British mercantile marine increased its movement,
in the matter of foreign entries and clearances
alone, to the extent of 22,000,000 tons . . . yet the
number of men who were employed in effecting this
great movement had decreased in 1880, as compared
with 1870, to the extent of about three thousand
(2,990 exactly). What did it? The introduction of
steam-hoisting machines and grain elevators upon
the wharves and docks, the employment of steam
power, etc. . . .
In 1873 Bessemer steel in England, where its price
had not been enhanced by protective duties, commanded
$80 per ton; in 1886 it was profitably manufactured
and sold in the same country for less than
$20 per ton. Within the same time the annual production
capacity of a Bessemer converter has been
increased fourfold, with no increase but rather a
diminution of the involved labor.
The power capacity already being exerted by the
steam engines of the world in existence and working
in the year 1887 has been estimated by the Bureau
of Statistics at Berlin as equivalent to that of
200,000,000 horses, representing approximately
1,000,000,000 men; or at least three times the working
population of the earth. . . .
One would think that this last figure would have caused Mr.
Wells to pause, and wonder why there was any employment
left in the world of 1889 at all; but he merely concluded, with
restrained pessimism, that "under such circumstances industrial
overproduction . . . may become chronic."
In the depression of 1932, the game of blaming unemploy-
ment on the machines started all over again. Within a few
months the doctrines of a group calling themselves the Technocrats
had spread through the country like a forest fire. I shall
not weary the reader with a recital of the fantastic figures put
forward by this group or with corrections to show what the real
facts were. It is enough to say that the Technocrats returned to
the error in all its native purity that machines permanently
displace men—except that, in their ignorance, they presented
this error as a new and revolutionary discovery of their own. It
was simply one more illustration of Santayana's aphorism that
those who cannot remember the past are condemned to repeat
it.
The Technocrats were finally laughed out of existence; but
their doctrine, which preceded them, lingers on. It is reflected
in hundreds of make-work rules and featherbed practices by
labor unions; and these rules and practices are tolerated and
even approved because of the confusion on this point in the
public mind.
Testifying on behalf of the United States Department of
Justice before the Temporary National Economic Committee
(better known as the TNEC) in March 1941, Corwin Edwards
cited innumerable examples of such practices. The electrical
union in New York City was charged with refusal to install
electrical equipment made outside of New York State unless
the equipment was disassembled and reassembled at the job
site. In Houston, Texas, master plumbers and the plumbing
union agreed that piping prefabricated for installation would be
installed by the union only if the thread were cut off one end of
the pipe and new thread were cut at the job site. Various locals
of the painters' union imposed restrictions on the use of
sprayguns, restrictions in many cases designed merely to make
work by requiring the slower process of applying paint with a
brush. A local of the teamsters' union required that every truck
entering the New York metropolitan area have a local driver in
addition to the driver already employed. In various cities the
electrical union required that if any temporary light or power
was to be used on a construction job there must be a full-time
maintenance electrician, who should not be permitted to do any
electrical construction work. This rule, according to Mr. Edwards,
"often involves the hiring of a man who spends his day
reading or playing solitaire and does nothing except throw a
switch at the beginning and end of the day."
One could go on to cite such make-work practices in many
other fields. In the railroad industry, the unions insist that
firemen be employed on types of locomotives that do not need
them. In the theaters unions insist on the use of scene shifters
even in plays in which no scenery is used. The musicians' union
required so-called stand-in musicians or even whole orchestras
to be employed in many cases where only phonograph records
were needed.
By 1961 there was no sign that the fallacy had died. Not only
union leaders but government officials talked solemnly of "automation"
as a major cause of unemployment. Automation was
discussed as if it were something entirely new in the world. It
was in fact merely a new name for continued technological
advance and further progress in labor-saving equipment.
But the opposition to labor-saving machinery, even today, is
not confined to economic illiterates. As late as 1970, a book
appeared by a writer so highly regarded that he has since
received the Nobel Prize in economics. His book opposed the
introduction of labor-saving machines in the underdeveloped
countries on the ground that they "decrease the demand for
labor"!1 The logical conclusion from this would be that the way
to maximize jobs is to make all labor as inefficient and unproductive
as possible. It implies that the English Luddite rioters,
who in the early nineteenth century destroyed stocking frames,
steam-power looms, and shearing machines, were after all
doing the right thing.
One might pile up mountains of figures to show how wrong1
1Gunnar Myrdal, The Challenge 4 World Poverty (NewYork: Pantheon
Books, 1970), pp. 400-401 and passim.
were the technophobes of the past. But it would do no good
unless we understood clearly why they were wrong. For statistics
and history are useless in economics unless accompanied by
a basic deductive understanding of the facts—which means in
this case an understanding of why the past consequences of the
introduction of machinery and other labor-saving devices had to
occur. Otherwise the technophobes will assert (as they do in
fact assert when you point out to them that the prophecies of
their predecessors turned out to be absurd): "That may have
been all very well in the past, but today conditions are fundamentally
different; and now we simply cannot afford to develop
any more labor-saving machines." Mrs. Eleanor Roosevelt,
indeed, in a syndicated newspaper column of September 19,
1945, wrote: "We have reached a point today where laborsaving
devices are good only when they do not throw the
worker out of his job."
If it were indeed true that the introduction of labor-saving
machinery is a cause of constantly mounting unemployment
and misery, the logical conclusions to be drawn would be
revolutionary, not only in the technical field but for our whole
concept of civilization. Not only should we have to regard all
further technical progress as a calamity; we should have to
regard all past technical progress with equal horror. Every day
each of us in his own activity is engaged in trying to reduce the
effort it requires to accomplish a given result. Each of us is
trying to save his own labor, to economize the means required
to achieve his ends. Every employer, small as well as large,
seeks constantly to gain his results more economically and
efficiently—that is, by saving labor. Every intelligent workman
tries to cut down the effort necessary to accomplish his
assigned job. The most ambitious of us try tirelessly to increase
the results we can achieve in a given number of hours. The
technophobes, if they were logical and consistent, would have
to dismiss all this progress and ingenuity as not only useless but
vicious. Why should freight be carried from Chicago to New
York by railroad when we could employ enormously more
men, for example, to carry it all on their backs?
Theories as false as this are never held with logical consis-
tency, but they do great harm because they are held at all. Let
us, therefore, try to see exactly what happens when technical
improvements and labor-saving machinery are introduced.
The details will vary in each instance, depending upon the
particular conditions that prevail in a given industry or period.
But we shall assume an example that involves the main possibilities.
Suppose a clothing manufacturer learns of a machine that
will make men's and women's overcoats for half as much labor
as previously. He installs the machines and drops half his labor
force.
This looks at first glance like a clear loss of employment. But
the machine itself required labor to make it; so here, as one
offset, are jobs that would not otherwise have existed. The
manufacturer, however, would have adopted the machine only
if it had either made better suits for half as much labor, or had
made the same kind of suits at a smaller cost. If we assume the
latter, we cannot assume that the amount of labor to make the
machines was as great in terms of payrolls as the amount of
labor that the clothing manufacturer hopes to save in the long
run by adopting the machine; otherwise there would have been
no economy, and he would not have adopted it.
So there is still a net loss of employment to be accounted for.
But we should at least keep in mind the real possibility that even
the first effect of the introduction of labor-saving machinery
may be to increase employment on net balance; because it is
usually only in the long run that the clothing manufacturer
expects to save money by adopting the machine: it may take
several years for the machine to "pay for itself."
After the machine has produced economies sufficient to
offset its cost, the clothing manufacturer has more profits than
before. (We shall assume that he merely sells his coats for the
same price as his competitors and makes no effort to undersell
them.) At this point, it may seem, labor has suffered a net loss
of employment, while it is only the manufacturer, the
capitalist, who has gained. But it is precisely out of these extra
profits that the subsequent social gains must come. The manufacturer
must use these extra profits in at least one of three
ways, and possibly he will use part of them in all three: (1) he
will use the extra profits to expand his operations by buying
more machines to make more coats; or (2) he will invest the
extra profits in some other industry; or (3) he will spend the
extra profits on increasing his own consumption. Whichever of
these three courses he takes, he will increase employment.
In other words, the manufacturer, as a result of his
economies, has profits that he did not have before. Every dollar
of the amount he has saved in direct wages to former coat
makers, he now has to pay out in indirect wages to the makers of
the new machine, or to the workers in another capital-using
industry, or to the makers of a new house or car for himself, or
for jewelry and furs for his wife. In any case (unless he is a
pointless hoarder) he gives indirectly as many jobs as he ceased
to give directly.
But the matter does not and cannot rest at this stage. If this
enterprising manufacturer effects great economies as compared
with his competitors, either he will begin to expand his operations
at their expense, or they will start buying the machines
too. Again more work will be given to the makers of the
machines. But competition and production will then also begin
to force down the price of overcoats. There will no longer be as
great profits for those who adopt the new machines. The rate of
profit of the manufacturers using the new machine will begin to
drop, while the manufacturers who have still not adopted the
machine may now make no profit at all. The savings, in other
words, will begin to be passed along to the buyers of
overcoats—to the consumers.
But as overcoats are now cheaper, more people will buy
them. This means that, though it takes fewer people to make
the same number of overcoats as before, more overcoats are
now being made than before. If the demand for overcoats is
what economists call "elastic" — that is, if a fall in the price of
overcoats causes a larger total amount of money to be spent on
overcoats than previously — then more people may be employed
even in making overcoats than before the new laborsaving
machine was introduced. We have already seen how this
actually happened historically with stockings and other textiles.
But the new employment does not depend on the elasticity of
demand for the particular product involved. Suppose that,
though the price of overcoats was almost cut in half—from a
former price, say, of $150 to a new price of $100—not a single
additional coat was sold. The result would be that while consumers
were as well provided with new overcoats as before,
each buyer would now have $50 left over that he would not
have had left over before. He will therefore spend this $50 for
something else, and so provide increased employment in other
lines.
In brief, on net balance machines, technological improvements,
automation, economies and efficiency do not throw
men out of work.
Not all inventions and discoveries, of course, are "laborsaving"
machines. Some of them, like precision instruments,
like nylon, lucite, plywood and plastics of all kinds, simply
improve the quality of products. Others, like the telephone or
the airplane, perform operations that direct human labor could
not perform at all. Still others bring into existence objects
and services, such as X-ray machines, radios, TV sets, airconditioners
and computers, that would otherwise not even
exist. But in the foregoing illustration we have taken precisely
the kind of machine that has been the special object of modern
technophobia.
It is possible, of course, to push too far the argument that
machines do not on net balance throw men out of work. It is
sometimes argued, for example, that machines create more jobs
than would otherwise have existed. Under certain conditions
this may be true. They can certainly create enormously more
jobs in particular trades. The eighteenth century figures for the
textile industries are a case in point. Their modern counterparts
are certainly no less striking. In 1910, 140,000 persons were
employed in the United States in the newly created automobile
industry. In 1920, as the product was improved and its cost
reduced, the industry employed 250,000. In 1930, as this
product improvement and cost reduction continued, employment
in the industry was 380,000. In 1973 it had risen to
941,000. By 973, 514,000 people were employed in making
aircraft and aircraft parts, and 393,000 were engaged in making
electronic components. So it has been in one newly created
trade after another, as the invention was improved and the cost
reduced.
There is also an absolute sense in which machines may be
said to have enormously increased the number of jobs. The
population of the world today is four times as great as in the
middle of the eighteenth century, before the Industrial Revolution
had got well under way. Machines may be said to have
given birth to this increased population; for without the
machines, the world would not have been able to support it.
Three out of every four of us, therefore, may be said to owe not
only our jobs but our very lives to machines.
Yet it is a misconception to think of the function or result of
machines as primarily one of creating jobs. The real result of the
machine is to increase production, to raise the standard of living,
to increase economic welfare. It is no trick to employ everybody,
even (or especially) in the most primitive economy. Full
employment—very full employment; long, weary, backbreaking
employment—is characteristic of precisely the nations
that are most retarded industrially. Where full employment
already exists, new machines, inventions and discoveries
cannot—until there has been time for an increase in
population—bring more employment. They are likely to bring
more unemployment (but this time I am speaking of voluntary
and not involuntary unemployment) because people can now
afford to work fewer hours, while children and the overaged no
longer need to work.
What machines do, to repeat, is to bring an increase in
production and an increase in the standard of living. They may
do this in either of two ways. They do it by making goods
cheaper for consumers (as in our illustration of the overcoats),
or they do it by increasing wages because they increase the
productivity of the workers. In other words, they either increase
money wages or, by reducing prices, they increase the
goods and services that the same money wages will buy. Sometimes
they do both. What actually happens will depend in large
part upon the monetary policy pursued in a country. But in any
case, machines, inventions and discoveries increase real wages.
A warning is necessary before we leave this subject. It was
precisely the great merit of the classical economists that they
looked for secondary consequences, that they were concerned
with the effects of a given economic policy or development in
the long run and on the whole community. But it was also their
defect that, in taking the long view and the broad view, they
sometimes neglected to take also the short view and the narrow
view. They were too often inclined to minimize or to forget
altogether the immediate effects of developments on special
groups. We have seen, for example, that many of the English
stocking knitters suffered real tragedies as a result of the introduction
of the new stocking frames, one of the earliest inventions
of the Industrial Revolution.
But such facts and their modern counterparts have led some
writers to the opposite extreme of looking only at the immediate
effects on certain groups. Joe Smith is thrown out of a job by
the introduction of some new machine. "Keep your eye on Joe
Smith," these writers insist. "Never lose track of Joe Smith."
But what they then proceed to do is to keep their eyes only on
Joe Smith, and to forget Tom Jones, who has just got a new job
in making the new machine, and Ted Brown, who has just got a
job operating one, and Daisy Miller, who can now buy a coat
for half what it used to cost her. And because they think only of
Joe Smith, they end by advocating reactionary and nonsensical
policies.
Yes, we should keep at least one eye on Joe Smith. He has
been thrown out of a job by the new machine. Perhaps he can
soon get another job, even a better one. But perhaps, also, he
has devoted many years of his life to acquiring and improving a
special skill for which the market no longer has any use. He has
lost this investment in himself, in his old skill, just as his former
employer, perhaps, has lost his investment in old machines or
processes suddenly rendered obsolete. He was a skilled workman,
and paid as a skilled workman. Now he has become
overnight an unskilled workman again, and can hope, for the
present, only for the wages of an unskilled workman, because
the one skill he had is no longer needed. We cannot and must
not forget Joe Smith. His is one of the personal tragedies that,
as we shall see, are incident to nearly all industrial and
economic progress.
To ask precisely what course we should follow with Joe
Smith—whether we should let him make his own adjustment,
give him separation pay or unemployment compensation, put
him on relief, or train him at government expense for a new
job--would carry us beyond the point that we are here trying to
illustrate. The central lesson is that we should try to see all the
main consequences of any economic policy or developmentthe
immediate effects on special groups, and the long-run effects
on all groups.
If we have devoted considerable space to this issue, it is
because our conclusions 'regarding the effects of new machinery,
inventions and discoveries on employment, production
and welfare are crucial. If we are wrong about these, there are
few things in economics about which we are likely to be right.
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