Workers are losing the war against machines

Market logic dictates that technological progress rewards ever-fewer people

The recent announcement that Limerick brothers Patrick and John Collison had achieved a valuation of $1.75 billion for their internet start-up company Stripe was universally treated as a good news story. Certainly it will do no harm to the Government's efforts to market Ireland as a knowledge economy.

Leaving parochial interests aside for a moment, however, the announcement points to a troubling imbalance in the world of international commerce. Stripe, which is based in San Francisco, employs 90 people. Mount Carmel Hospital, which employs 330 people in south Dublin, is being liquidated for want of a few million quid.

Is a computer firm which handles online payments 350 times more valuable than a maternity hospital? Apparently so, according to Nama’s valuation of Mount Carmel, and – as we know – the market never lies.

Looking closer at Stripe's employee-to-value ratio, one might also ask who exactly will be the losers from their success? The answer is pretty clear and will induce little sympathy: the banks. Before Stripe came along, in the company's own words, online payments were administered by "lumbering" financial institutions which tied clients up in "weeks of set-up, reams of paperwork, and bureaucratic approval processes". The banks are, as Patrick Collison says, "dinosaurs". And yet (hear the strains of the smallest violin in the world playing) those dinosaurs happen to have been a huge source of employment down the years.


The great decoupling
There is a broader phenomenon here which troubles many economists, and that's the correlation between technological progress and job losses. Erik Brynjolfsson and Andrew McAfee of the MIT Sloan School of Management have done extensive research in the past three years showing how "workers are losing the war against machines". Traditionally economic growth led to job creation but since 2000 there has been a "great decoupling" as productivity and wealth-creation continue to rise but employment has levelled off or declined, they say.

What adds spice to their argument is the fact that they are technology insiders, who are largely optimistic about the impact of innovation. They just point out that if you’re in a middle-class profession – an office clerk, a bank teller or a pharmacist – then you’re in for an uncomfortable future.

The same thesis is advanced by another technology insider: Jaron Lainier. In his book Who Owns the Future?, he argues that the market logic of the internet is to create ever-higher rewards for a small number of innovators, while offloading financial risk onto wider society and destroying professional classes one by one: starting with the likes of record producers and journalists (cue the violin again) and then moving on to teachers, lawyers and healthcare workers.

Why, he asks, would the future operator of a private nursing home pay for a human being to monitor patients rather than a computer that commands no health insurance or pension, and which can deliver pills mechanically, and monitor vital signs, with a greater degree of precision?

There is a huge policy challenge in this for Ireland and internationally. What will people do for a living if they can’t make it as tech entrepreneurs? And if the market can’t provide sufficient jobs in the future then should the State step in – and perhaps subsidise employment with an intensity to match whatever progress there is in technology? We might not have ready answers but we should at least be asking the questions.

Again, this isn’t to pick on the Collisons but the coverage of their success reflects an unquestioning approach to technology that runs throughout our lives. “We shape our tools and thereafter our tools shape us,” the Irish-American critic Fr John Culkin famously said. The truth of this statement can be confirmed by anyone who has answered work emails on their smartphone after midnight.

There are many unforeseen consequences of technology, and sometimes it can even change the course of history. If it wasn't for Twitter, for example, it's quite possible – some would say probable – that Sean Gallagher would be president of Ireland today. Instead Michael D Higgins is President and ironically enough he warned last week against a slavish pursuit of technological progress.

Speaking at the Irish Technology Leadership Group forum at the University of Limerick, he noted how more than 100,000 people are now employed in technology in Ireland, with 18,000 jobs created since 2010.

He continued: “However, as we build this promising future it must be underpinned by a strong contemporary ethic . . . a sense of justice that prioritises meeting the legitimate needs of the many over sating the speculative ambitions of the few.”

“New Luddite” or not, it’s about time someone said it.