Technology and Wealth Redistribution (Part 1 – Labour Exploitation)

Discuss why ‘accelerating changes in technology’ might be expected to result in ‘worsening unemployment and re-distributional consequences’.

This was one question from last year’s “A” level Economics Case Studies exam, and it blew my mind a little just how challenging these questions can get these days.

I will be a bit cocky here (also partly because I am not the student victim hah!), but hazard a suspicion that I would not find this too challenging for myself.

But for students? *shakes head*

Unless you are one of The Precocious Beings, you would have a hard time as there is quite a dose of background know-how that would go a long way in confidently answering the question.

Ordinarily, I wouldn’t bother writing a post on “how to answer this exam question”. If you were looking for someone who writes such stuff, you could find others by the dime and dozen.

So why this article then? Long story short, this is an intriguing question that appears to depict “modern problems”. But in truth, this is an age-old question with plenty of historical baggage, with a life of its own beyond “just testing students”.

And that in itself, is reason enough to put my bum on the chair and start typing away for you guys.

But first, the “standard” answer.

It is a sign of great effectiveness in the Singapore government’s attempts to internalise the national narrative in us, that pretty much all students are aware of how technological advances can up-end the labour market.

Let’s start with the obvious tale that all of us can claim to know:

  1. The employer invests in new technology which is better and faster than the worker.
  2. The worker is made redundant and gets laid off.
  3. The employer gets rich – and the worker suffers.
  4. The End.

To put in more formal terms, advancing technology, or the increasing accessibility to it, has allowed the reduction of labour to become a viable or even superior strategy for the firm.

The most straightforward way to illustrate this in the exam is to translate the profit-maximising firm decision via reductions to the cost of production with the adoption of manual labour-replacing technologies.

Labour Exploitation 101

But this fairly simple story has a jarring “unjust” slant to it. And for good reason.

The workers have been reduced to mere tools to the profit-maximising employers – employed only when the God of Profit endorsed.

In our little tale, employers are those who own capital and just require workers to mate with them (ahem – don’t think dirty) and produce goods and services for them to sell and line their pockets further.

Capital is defined here as assets that can enhance one’s power to perform economically useful work. You can read more about its characteristics in Economics in wiki.

Oh and one more comment – I just need to give both sets of men (and women) nice names too: Bourgeoisie for the “atas” ones, and Proletariat for the workers.

And that, boys and girls, was an incredibly diluted low-down of what Marxian Economics is about.

Redistributing wealth, Proletariat to Bourgeoisie

Karl Marx, for whom that branch of Economics is named after, was a German social scientist who dabbled in the various social sciences. In his day, inter-disciplinary intellectual pursuits were rather fashionable.

I admit that I probably did this brilliant man no favours with my highly simplistic explanations. So please take my word that he was a very smart chap who was ahead of his time, and understand the contexts within which he lived in by watching this awesome video.

So it wasn’t like “accelerating changes in technology” was a recent phenomenon that everyone was discussing about only now. Wrapped up in this ongoing debate are the historically rich contexts that belie tensions that have spanned many generations.

At the heart of Marxian Economics, or many Economics theories for the matter, is the assumption of self-interest in decision-making by the economic agents.

Marxian Economics therefore dictates tension between:

  1. Bourgeoisie, who will always be keen to reduce total production costs including wage payouts; and
  2. Proletariat, who will prefer “just” employment terms, and of course, leisure.

In addition, labour, as a factor of production, is inconveniently provided by Proletariat, who obviously have minds of their own and are therefore able to resist the Bourgeoisie.

From their perspective, what better way to potentially jeopardise your production than to hire more workers than you need?

More recently too, the reduction in human activity forced by the COVID-19 crisis has negatively impacted production processes that are labour-intensive, giving further impetus to technological displacement of workers.

Considering how technological advances are often:

  1. Targeted, rather than open-ended; and
  2. Cost-intensive.

It doesn’t take much imagination to see why some extremes believed that the technological advances in production techniques that have been described benignly, or even glowingly, were largely developed by the Bourgeoisie to cut out labour altogether if possible.

Indeed, Marxian Economists take the view that technological advances is just one of many excuses by the Bourgeoisie to accumulate more wealth and power at the expense of the Proletariat.

Higher economic rent, gained as a result of improved labour productivity, are actually surplus earned by the Bourgeoisie at the expense of the Proletariat, or a redistribution of wealth from workers to firms (and their owners), in the context of the exam question.

Class Consciousness and Revolution

Famously, Marx predicted that class tensions between the haves and have-nots will eventually cause the capitalist system to implode (a.k.a have a revolution), through a process called “class consciousness” and a new classless socialist system will form.

If this sounds familiar, you were probably thinking about communism – and you would be right. The Communist movements took inspiration from Marx’s works, although how they were carried through weren’t really to the same spirit that he had imagined to be ideal for us.

Nonetheless, Marx’s name lives on more than a century since his passing, and it is testament to his legacy that I chose to write on his line of reasoning, in this first installment of the mini-series on Technology and Wealth Distribution.

Wa…how come answer so long until can make mini-series?

I sompah – this wasn’t my original intent.

But as I typed, I found that:

  1. Even diluting the theories as horribly as I dared didn’t make the explanations very short; and
  2. Through the course of researching materials, I found even more compelling stories to share with you.

And so I decided to break the writing up into several write-ups and I hope you will find them useful and enjoyable to read.

More to come!

As always, share your thoughts with me by leaving your comments below!

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