Krugman Joins the Luddites?

     This piece by Krugman is excellent, actually, as it touches on something that I have thought for a long time. When Joe Stiglitz had a Rolling Stone piece back in 2012 where discussed the idea that the rise of the Internet Age may have displaced workers he was accused of committing the lump of labor fallacy. 

     http://diaryofarepublicanhater.blogspot.com/2011/12/is-stiglitz-guilty-of-lump-sum-of-labor.html

     It's clear that among establishment economists-Neoclassical economists in other words-this is a great economic error. Changes in technology can cause jobs to be lost within an industry or maybe even more than one industry but not the economy as a whole. 

    Nick Rowe who just recently honored Diary with a comment on the austerity debates spoke out against this as an elementary economics error that Stiglitz had made. 

     "Stiglitz: "The cities weren’t spared—far from it. As rural incomes fell, farmers had less and less money to buy goods produced in factories. Manufacturers had to lay off workers, which further diminished demand for agricultural produce, driving down prices even more. Before long, this vicious circle affected the entire national economy."

    "That is precisely where he goes wrong. That is just really bad macroeconomics. If I put my Keynesian hat on, it's still really bad macroeconomics."

      http://diaryofarepublicanhater.blogspot.com/2011/12/nick-rowe-again-checks-in-about.html

     http://worthwhile.typepad.com/worthwhile_canadian_initi/2011/12/the-gizmo-theory-of-the-recession.htmll

      Actually I believe Nick argued that it's also wrong based on the-Keynesian-national income accounting model. 

       However, the fact is this. While I respect the work of economists and do my best to understand and analyze their theory, at the end of the day it's clear to me that something has really changed in the economy thanks to the Internet age. Now me going on what I observed in my own personal experience in 2000 and 2001 may seem unscientific to economists. Still I was in the labor market in 2001 and remember it changing more or less over night. 

     Krugman, a man who knows theory well, now gives voice to my own personal experience. He admits that even if you buy into the rather Panglossian world of the economists, there are still valid problems to raise:

     "In 1786, the cloth workers of Leeds, a wool-industry center in northern England, issued a protest against the growing use of “scribbling” machines, which were taking over a task formerly performed by skilled labor. “How are those men, thus thrown out of employ to provide for their families?” asked the petitioners. “And what are they to put their children apprentice to?”

    "Those weren’t foolish questions. Mechanization eventually — that is, after a couple of generations — led to a broad rise in British living standards. But it’s far from clear whether typical workers reaped any benefits during the early stages of the Industrial Revolution; many workers were clearly hurt. And often the workers hurt most were those who had, with effort, acquired valuable skills — only to find those skills suddenly devalued."

     http://www.nytimes.com/2013/06/14/opinion/krugman-sympathy-for-the-luddites.html?partner=rssnyt&emc=rss&_r=0

     It's easy to say that displaced workers should learn another trade-today it's get another degree-however, who feeds their families or pays the bills in the mean time? 

     "So should workers simply be prepared to acquire new skills? The woolworkers of 18th-century Leeds addressed this issue back in 1786: “Who will maintain our families, whilst we undertake the arduous task” of learning a new trade? Also, they asked, what will happen if the new trade, in turn, gets devalued by further technological advance?

     "And the modern counterparts of those woolworkers might well ask further, what will happen to us if, like so many students, we go deep into debt to acquire the skills we’re told we need, only to learn that the economy no longer wants those skills?"

     Usually the rise of inequality is explained in the inequality of education. Those with higher educations get the good jobs and the worker security those who don't have education lose out. As Krugman notes this is a comforting narrative: all we need is education. Yet it's not so any more. What we see now is that even those with lots of education can find themselves out of work or in jobs well beneath their degree, Then they still owe the college lenders 6 figures. 

     "Until recently, the conventional wisdom about the effects of technology on workers was, in a way, comforting. Clearly, many workers weren’t sharing fully — or, in many cases, at all — in the benefits of rising productivity; instead, the bulk of the gains were going to a minority of the work force. But this, the story went, was because modern technology was raising the demand for highly educated workers while reducing the demand for less educated workers. And the solution was more education."

     "Now, there were always problems with this story. Notably, while it could account for a rising gap in wages between those with college degrees and those without, it couldn’t explain why a small group — the famous “one percent” — was experiencing much bigger gains than highly educated workers in general. Still, there may have been something to this story a decade ago."

     "Today, however, a much darker picture of the effects of technology on labor is emerging. In this picture, highly educated workers are as likely as less educated workers to find themselves displaced and devalued, and pushing for more education may create as many problems as it solves."

       "I’ve noted before that the nature of rising inequality in America changed around 2000. Until then, it was all about worker versus worker; the distribution of income between labor and capital — between wages and profits, if you like — had been stable for decades. Since then, however, labor’s share of the pie has fallen sharply. As it turns out, this is not a uniquely American phenomenon. A new report from the International Labor Organization points out that the same thing has been happening in many other countries, which is what you’d expect to see if global technological trends were turning against workers."

     Here Krugman describes my own experience and my own instinct on the matter-that labor has been hurt in recent years by technology and the Internet. In the 80s and 90s the education theory was much more plausible as the workers being downsized and displaced were mostly blue collar with little education. However, since 2000 we've seen that white collar, educated workers are no longer safe. 

     I don't know if pointing this out makes one a Luddite, however, if it does then a Luddite I am and so is Krugman. 

    Krugman ends his piece with a question:

    "So what is the answer? If the picture I’ve drawn is at all right, the only way we could have anything resembling a middle-class society — a society in which ordinary citizens have a reasonable assurance of maintaining a decent life as long as they work hard and play by the rules — would be by having a strong social safety net, one that guarantees not just health care but a minimum income, too. And with an ever-rising share of income going to capital rather than labor, that safety net would have to be paid for to an important extent via taxes on profits and/or investment income.

      "I can already hear conservatives shouting about the evils of “redistribution.” But what, exactly, would they propose instead?"

     If this is Luddite economics how do you explain what we've seen since 2000? Where education doesn't make you more secure and may well leave you deep in debt? Do you deny that the character of inequality has changed since 200o-previously it was competition among labor but now labor as a whole has fallen behind capital?