Andrew Little centred his first speech as Labour leader on “work”. He hit the mark. Work is changing fast and taking society with it.
There are two main drivers, globalisation and technology.
Globalisation intensified in the 2000s into what Harvard economist Dani Rodrik called hyperglobalisation.
Globalisation spread work around the globe and evened wages for routine production or service work. Hyperglobalisation accelerated that and made it more difficult or more costly for rich countries to erect 1930s-70s-type national policy walls to protect jobs and wages.
Hyperglobalisation has made “value chains” more complex. A product may be designed in one country, its parts made in various other countries and assembled in yet another, then marketed by people in the first country for retail everywhere, including online.
Designers and marketers have a bigger share of a product’s value than processors. If the United States had raised tariffs on Chinese-assembled iPhones, Apple’s design and marketing income would have been hit hardest.
So a feared swing to nationalistic trade barriers behind and at the border, as in the 1930s Depression, has by and large not materialised.
The high interdependency and interconnectedness among national economies means that if Little was to try 1930s-70s policies to protect wages, the result could be perverse.
What has brought about this greater economic interdependency and interconnectedness? Some think it is “neoliberal” ideology and it has played a part. More important now is technology.
Little’s old union principally represents fairly well paid (at least in the past) workers in manufacturing and related trades. But digital technology is changing manufacturing fast.
A short list includes “crowd” input into design, computerised organisation and maintenance of factories plus “intuitive layout”, robotised processing and other production method changes, additive manufacturing which enables things to be manufactured at the point of use or sale and extensive use and analysis of ever-expanding data to pinpoint potential customers. (“They” know what page you are on in the book on your tablet.)
Also, “micro-controllers” — tiny computers — add a “services” dimension to “manufactures”, blurring the line between the two to the point where it is close to meaningless.
New technology replaces workers. Take forklift drivers. Newly re-wed Trevor Clifton — oops, Mallard — said a decade or so ago they could no longer be unskilled: they needed education to understand the instruments. Now interactive robots are the spectre: forklift drivers “will be extinct”, says Michael Moritz, an “early-stage” investor in the likes of Cisco, Google and PayPal.
In addition, work arrangements are increasingly fluid and insecure and less well paid than manufacturing once was.
The same goes for clerical and many services jobs. Digital technology is revolutionising diagnoses, treatments and delivery systems and empowering health customers. Education, too, is on the cusp of major, customer-driven change.
The 2010s are the coming of age of digital technology.
This “fourth industrial revolution”, as the Germans call it (others call it the third), is similar to the first in its reordering of society — except that it is happening multiple times faster.
That first revolution created new, better-paid jobs to replace the ones destroyed.
Market cheerleaders assume this will happen this time and point to some high-paying new jobs.
Sceptics say they can’t see many of those yet and say most displaced people end up in low-paying, insecure in-person-service jobs and that even if new high-paying jobs do come along in large numbers, they may come too late for this generation.
Even in the short term there are fewer certainties than was assumed even 10 years ago when economists’ “general equilibrium models” ruled policy responses.
An example is the Reserve Bank’s puzzlement at “unexplained weakness” in price rises when the economy is motoring at what used to be an inflationary speed of GDP growth.
The models say inflation will return at some point. But what if we are in a new era of falling prices, similar to the aftermath of the first industrial revolution?
Then thinkers who were as disruptive as the new technologies, Adam Smith and Karl Marx among them, recast old ways of explaining society and the economy.
It is possible today’s disruptive technology will also require disruptive thinking. Greens would argue for ecological economics in place of GDP but that does not solve Little’s “work” conundrum.
Disruptive thinking is beyond reformist Bill English, whose policy on “work” (so far) has been more flexibility and so more individual insecurity, justified on the need for the economy to stay competitive in a hyperglobalised world.
It is probably also beyond Little and Labour, not least because there is no new Smith or Marx yet to draw on.
Unless, of course, the market cheerleaders are right and no big rethink is needed.