Tag Archives: Stiglitz

Is Resistance Futile?

In the wake of the 2016 Presidential election, we saw a battle among figures in what the late Molly Ivins called “the chattering classes” over the nature of Trump’s support. Nice people who want to think well of their fellow Americans identified economic insecurity, while not-so-nice others (including me) attributed the bulk of Trump votes to racism.

The ensuing research validated the racism connection, but of course, neither interpretation explained all votes or described all motives. It turned out that most Trump voters were not economically insecure, and researchers confirmed that “racial resentment” was the most robust predictor of Trump support, but there was one group for which economic insecurity was a motivating factor–prior Obama voters who switched to Trump. And the source of that insecurity was the steady increase in automation and AI–artificial intelligence.

Thomas Edsall reports on a recent study of –as he puts it–an “era in which vast swaths of the population are potentially vulnerable to the threat — or promise — of a Fourth Industrial Revolution.”

This revolution is driven by unprecedented levels of technological innovation as artificial intelligence joins forces with automation and takes aim not only at employment in what remains of the nation’s manufacturing heartland, but increasingly at the white collar, managerial and professional occupational structure.

The technological innovations we’ve experienced have ushered in an economy that rewards college-educated workers and disadvantages others, contributing to economic inequality. The scholars Edsall quotes predict that these advances in technology are likely to create additional social upheaval as they steadily affect the future of jobs.

Researchers find that exposure to automation correlates with support for Trump.

The strong association of 2016 Electoral College outcomes and state automation exposure very much suggests that the spread of workplace automation and associated worker anxiety about the future may have played some role in the Trump backlash and Republican appeals.

The study Edsall cites found that so-called “heartland states” like Indiana and Kentucky, both of which have heavy manufacturing histories and low educational attainment,

contain not only the nation’s highest employment-weighted automation risks, but also registered some of the widest Trump victory margins. By contrast, all but one of the states with the least exposure to automation, and possessing the highest levels of educational attainment, voted for Hillary Clinton.

That gets us back to the relationship between populism and automation. Edsall quotes an economist at  Harvard’s Kennedy School, who studied those Obama-to-Trump voters.

Switchers to Trump are different both from Trump voters and from other Obama voters in identifiable respects related to social identity and views on the economy in particular. They differ from regular Trump voters in that they exhibit greater economic insecurity, do not associate themselves with an upper social class and they look favorably on financial regulation. They differ from others who voted for Obama in 2012 in that they exhibit greater racial hostility, more economic insecurity and more negative attitudes toward trade agreements and immigration.

In my last book, I addressed the threat automation poses to millions of jobs, and cautioned that humans tend to get meaning and purpose from employment. Edsall quotes from a 2017 paper in which economists Anton Korinek and Joseph E. Stiglitz  went further, warning that artificial intelligence has the potential to create a high-tech dystopian future.

Without extraordinary interventions, Korinek and Stiglitz foresee two scenarios: both of which could have disastrous consequences:

In the first, “man and machine will merge, i.e., that humans will ‘enhance’ themselves with ever more advanced technology so that their physical and mental capabilities are increasingly determined by the state of the art in technology and A.I. rather than by traditional human biology.”

Unchecked, this “will lead to massive increases in human inequality,” they write, because intelligence is not distributed equally among humans and “if intelligence becomes a matter of ability‐to‐pay, it is conceivable that the wealthiest (enhanced) humans will become orders of magnitude more productive — ’more intelligent’ — than the unenhanced, leaving the majority of the population further and further behind.”

In the second scenario, “artificially intelligent entities will develop separately from humans, with their own objectives and behavior, aided by the intelligent machines.”

Unlike the Borg, Korinek and Stiglitz do not conclude that resistance to these possible consequences is futile. Instead, they advocate for government intervention and redistribution to counter the threats, leading Edsall to conclude with “the” question:

If fully enacted, could Biden’s $6 trillion-plus package of stimulus, infrastructure and social expenditure represent a preliminary step toward providing the social insurance and redistribution necessary to protect American workers from the threat of technological innovation? Can spending on this scale curb the resentment or heal the anguish over wrenching dislocations of race, culture and class?

I guess we’ll see.

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Who Gets What–And Why

Joseph Stiglitz–a Nobel Prize-winning economist–recently testified before the Senate Budget Committee about America’s growing inequality. 

As disturbing as the data on the growing inequality in income are, those that describe the other dimensions of America’s inequality are even worse: inequalities in wealth are even greater than income, and there are marked inequalities in health, reflected in differences, for instance, in life expectancy. But perhaps the most invidious aspect of US inequality is the inequality of opportunity. America has become the advanced country not only with the highest level of inequality, but is among those with the least equality of opportunity—the statistics show that the American dream is a myth; that the life prospects of a young American are more dependent on the income and education of his parents than in other developed countries. We have betrayed one of our most fundamental values. And the result is that we are wasting our most valuable resource, our human resources: millions of those at the bottom are not able to live up to their potential.

Stiglitz made several important observations about the situation in which we find ourselves: first–and perhaps most importantly–he pointed out that our current levels of inequality are the result of policy choices we have made, either deliberately or inadvertently.  Stiglitz identifies our  education system and the manner in which it is financed, our health system, our tax laws, bankruptcy and anti-trust laws, the functioning of our financial system, corporate governance…. and he says that existing policies in each of these areas help enrich the top at the expense of the rest.

Stiglitz also pointed out that the folks currently enjoying their status as members of the 1% are “not those who have made the major innovations that have transformed our economy and society.” They are disproportionately the manipulators and rent-seekers, the speculators and financiers–not the entitled producers or “makers” they evidently believe themselves to be.

Stiglitz noted that “trickle-down”–the belief that gains at the top will eventually raise the prospects of those on the bottom–has been thoroughly discredited. He explained that the recent Great Recession has exacerbated–but not caused–our growing inequality.  He underlined what should be obvious to all of us by now:  jobs are not created when wealthy individuals get to keep more of their money–they are created by demand, and when middle-class folks don’t have discretionary income, demand remains weak.

In a recent column, Paul Krugman–also a Nobel prize winning economist–explained why improving demand is so critical:

Economists who took their own textbooks seriously quickly diagnosed the nature of our economic malaise: We were suffering from inadequate demand. The financial crisis and the housing bust created an environment in which everyone was trying to spend less, but my spending is your income and your spending is my income, so when everyone tries to cut spending at the same time the result is an overall decline in incomes and a depressed economy. And we know (or should know) that depressed economies behave quite differently from economies that are at or near full employment.

Stiglitz also talked bluntly about the likely consequences for the country–both democratic and economic– if we don’t change the policies that are feeding, rather than curing, the problem.

His entire testimony is both depressing and illuminating, and well worth reading.

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A Different Kind of Economic “Bubble”

In my Media and Public Policy class last week we were discussing the ways in which the Internet has given us the ability to live in “reality bubbles” of our own choosing, when an older student made a perceptive observation. She pointed out that when she grew up in Martinsville, she’d been surrounded by a “bubble” of bigotry–she’d lived in a small community of homogeneous people who all thought alike. In her case, the Internet had provided an escape from the bubble.

We all live in bubbles of one kind or another, and that ability to isolate ourselves from those with whom we do not share geography, religion, common interests and experiences can stunt our human empathy. When our distance from each other becomes too great, civility and self-government suffer.

Joseph Stiglitz is a Nobel-winning economist, and he has just written a book called The Price of Inequality, examining the effects of  the currently huge divide between the rich and everyone else on our ability to sustain a democratic government.

He isn’t sanguine.

According to Stiglitz, the vaunted American market is broken. It has been overwhelmed by politically engineered market advantages—special deals that economists call “rent-seeking.” The term refers to politically-achieved “exemptions” from the market that allow certain individuals to reap economic returns above normal market levels– profits derived from favorable political treatment rather than competitive success.

In The Price of Inequality, Stiglitz chronicles these blatant tax and spending giveaways–the special deals and corporate welfare enjoyed by big agriculture, big energy, and many, many others.

Stiglitz also argues that much of the rent-seeking that plagues our economy takes a more subtle form. In many cases, the production of a product produces what economists call “negative externalities.” These are costs that are incurred during the manufacturing or development process that end up being imposed on society rather than paid for by the producer and included in the price of the goods or services involved. The most commonly cited example would be a manufacturer who discharges his waste into a nearby waterway rather than properly disposing of it, shifting the costs of cleanup and disposal to others. Society pays for the pollution, and that cost is not included in the market price of the manufactured goods.

The bottom line is that markets don’t operate properly when some participants are in a position to game the system, and societies don’t operate properly when markets are rigged.

As he points out, one of the consequences to society is that when those at the top–the 1%–enjoy the best health care, education, and other benefits that come with greater wealth, they fail to realize that “their fate is bound up with how the other 99 percent live.”

They live in a bubble.