The Hourglass Economy

Auto-Industrialism: DIY Capitalism and the Rise of the Auto-Industrial Society
by Peter Murphy
SAGE Publications, 2017, 136 pages, £45
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The revolt of the deplorables and their role in the election of President Donald Trump has focused attention on the plight of white working-class men in rust-belt states where manufacturing jobs have long since migrated offshore. What has attracted less attention is the way in which robotics and automation are eroding middle-class jobs. Peter Murphy’s Auto-Industrialism: DIY Capitalism and the Rise of the Auto-Industrial Society admirably redresses that deficit.

Murphy’s lively and insightful book is fundamentally optimistic about what is nonetheless an alarming trend. Just as advanced economies shed millions of jobs when they moved from the industrial to the post-industrial era, as manufacturing moved offshore and was largely replaced by lower-wage, serviced-based employment, so advanced economies are now moving into what Murphy calls the auto-industrial era, where service-based jobs and white-collar workers are being replaced by self-service technology which relies on online, computerised or robotic automation.

The trend started almost half a century ago; the first ATMs were introduced in 1969, for example. Now, auto-industrialism is going through another wave as ATMs worldwide are being pulled out and we move into an increasingly cashless economy, with more purchases made using electronic funds transfer at the point of sale and more banking done online.

For a while ATMs led to an increase in bank tellers as the cost of opening branches dropped, but now bank tellers are vanishing, just as travel agents are as people make their own travel bookings online. And the trend is all but ubiquitous; online check-ins are reducing jobs in airports just as self-service checkouts are reducing jobs in supermarkets. Online purchases are transforming the role of shops into places where you try before you buy, then click and collect. While there are still jobs in shops it is predicted that, in the UK, 60 per cent of the current retail workforce will disappear in the next two decades.

While President Trump is pressuring firms to continue to manufacture in the US or to bring factories back to the US, the harsh reality is that this is unlikely to create much employment. Robots are so cheap these days that location close to consumer markets is becoming more of a consideration than the cost of labour, and people-less factories and people-less warehouses will eventually be coupled with driverless transport systems. This applies not just to advanced economies like the US but also to China, where the population is rapidly ageing and younger people are not as keen to work in factories. And robots are not just replacing workers in factories but on farms, in mines and, in countries such as Japan, in nursing homes.

In response, there have been calls for neo-Luddism. There are up to 3.5 million truck drivers in the US and the advent of driverless trucks, which already operate in Australian mines, could put all of them out of work. Already a startup says it can refit trucks to make them driverless for around $30,000. Coal mining in the US shed some 50,000 jobs in the last five years, creating a political crisis, so the loss of more than a million truck driving jobs, which are the largest source of employment in twenty-nine US states, would be a major blow to the white working-class men who dominate the profession.

The auto-industrial revolution is working its way through almost every industry. Downloading films and television programs online and watching them on large screens at home has done away with the video store and poses a threat to cinemas and free-to-air television and cable stations. The rise of online and social media has dealt a major blow to the business model of print media as readers move online while advertising revenue for online readers is only a fraction of what can be earned from print media ads.

In one way, there is nothing new about all this. As Murphy points out, the process of industrialisation has always resulted in machines substituting for hand, back and brain power, but in the auto-industrial era it is not just jobs such as reading parking meters which are being lost, but middle-class professional jobs such as reading medical radiological diagnoses, preparing tax returns, conducting paralegal document searches, and book-keeping.

In the post-industrial era, the size of the university sector ballooned, as did the size of the administrative class, to the point where 15 per cent of GDP in advanced economies today is consumed by regulation. But in the auto-industrial era, says Murphy, the graduate employment market is shrinking, while the number of graduates driving taxis is growing and median graduate salaries have shrunk.

Universities had been protected from the forces of auto-industrialism but the DIY university is already emerging in Massive Online Open Courses (MOOCs). While governments have, to date, guaranteed the revenue model of the high-cost university, there will be increasing pressure on them to allow students to educate themselves using MOOCs at minimal cost and to simply sit rigorously conducted independent examinations.

The pressure to move to such a model will come from students, taxpayers and governments themselves as all three buckle under the cost of the continued subsidy of the current high-cost model, which in many instances, particularly in the arts and social sciences, delivers a debased education. Thus, we can add university staff and primary and secondary teachers to those whose job prospects look less than certain in the auto-industrial era. Indeed, the labour market, writes Murphy, is starting to look like an hourglass, with the growth of both low-skilled service workers and high-skilled professionals and a shrinkage of work in between.

One upside of this, according to Murphy, is that “the age of the government, health and education juggernaut is over”. The rise of auto-industrial companies such as Uber shows how the role of licensing taxis by government is dramatically reduced if not abolished using algorithmic computing to link drivers with passengers and facilitating cashless payment.

Uber shows how a domestic asset, such as a car, is turned into an income stream. Similarly, Airbnb turns a house into a part-time bed-and-breakfast, providing additional income for owners, renters and even people who do not own real estate but facilitate rental income for others. This conversion of “tacit capital into active capital” is a hallmark of auto-industrialism and the independent capitalism it fosters.

Auto-industrialism favours self-starters, says Murphy, who are creative enough to set up their own businesses. The most desirable employees will be problem solvers and the most in-demand occupations will be trans-disciplinary, merging “arts, science, design, technology and business disciplines”. These trans-disciplinary abilities will be essential for future businesses such as running 3D-printing start-up companies, which will require a knowledge of digital fabrication tools and methods, computer programming and visual design. This gets to the essence of auto-industrialism, says Murphy; it has a “strong do-it-yourself component and a model of value creation that revolves around design fused with technology and mathematics”.

As Murphy writes, the ability to design and print objects large and small in almost any material, embodying complex geometry, has enormous potential for bespoke structures of all kinds, including houses and even multi-storey buildings. In China, 3D houses are already being built, in twenty-four hours, for $10,000. So, we can add to the jobs that will probably shrink in the auto-industrial era those of construction workers.

3D printing illustrates how enormous productivity can be unleashed through auto-industrialisation; and just as the loss of manufacturing jobs in advanced economies was compensated for by the dramatic reduction in the cost of imported whitegoods, televisions, air-conditioners and so forth, so to some extent the loss of jobs in the auto-industrial era may at least be partially compensated for by, for example, much cheaper housing.

Yet, the truth of the matter is that neither Murphy nor anyone else knows what the future of work will look like as the auto-industrial revolution progresses. There is no guarantee that it will be a painless process. The growth of intergenerational welfare in the post-industrial era showed that for some people it proved impossible to find work.

The rise of Trump was one response to the anger of the white working and middle classes, as they saw their status in society eroded both by their decline in income and job opportunities and by the emergence of a culture which celebrated minorities and declared them oppressors rather than victims of the economic and social revolutions disrupting society. But the US response has been relatively benign compared with the emergence of authoritarian, populist and fascist parties in Europe. Having seen the way the industrial revolution and the creation of unemployment and economic dysfunction contributed to the rise of communist and fascist governments in Europe in the twentieth century and to two world wars, no one can afford to be complacent about what may unfold as so many jobs are eliminated so quickly.

Murphy points out that Western societies, apart from their migrant populations, are shrinking and ageing and that this will mitigate the growth of unemployment. Certainly, a country such as Australia, with a relatively tightly controlled immigration program of largely skilled workers, has shown that it is possible to adjust to post-industrialism with uninterrupted economic growth over a quarter of a century and deliver rising living standards. The growth of auto-industrialism in Australia, particularly in the mining industry, has also shown that the loss of jobs in mining has been combined with rising incomes across the nation, during two mining booms, and that the wealth generated through highly competitive mining exports continues to contribute to the welfare of the rest of the nation, through the tax and transfer system, even though the mining construction boom has ended.

But the Australian economy also exemplifies the way in which the health, education and administrative sectors have ballooned during the post-industrial era and now act as an enormous drag on the growth of productivity. If auto-industrialisation contributes to the reduction of these sectors and unleashes new productivity, Australia may once again be the lucky country. But that is far from certain. In the meantime, Peter Murphy’s book is an excellent contribution to a debate that will be vital in ensuring that we profit from auto-industrialisation rather than sink under the weight of post-industrial parasites.