Paul Mason: Our economic problem isn’t robots, it’s low-wage car-washes

The headlines were inevitable, once the Bank of England Governor Mark Carney uttered the word automation . Robots, the Sun told us, are set to “steal 15m jobs from Brits” . Sadly, our main problem is not robots; still less the artificial intelligence technologies that will power them.

Our real problem is symbolised by the car wash. A car wash used to mean a machine. Now it means five guys with rags. There are now 20,000 hand car washes in Britain, only a thousand of them regulated. By contrast, in the space of 10 years, the number of rollover car-wash machines has halved – from 9,000 to 4,200. The free-market economic model, combined with a globalised labour market, has produced a kind of reverse industrialisation.

Five guys with rags can undercut a machine that cost tens of thousands of pounds to build, because the entire economic system is geared to distributing the proceeds of globalisation upwards and its costs downwards. Mark Carney had some very prophetic things to say about this problem, as well, but funnily enough the tabloids ignored it.

Carney last week became one of the first powerful policymakers to recognise that the crisis of globalisation, the stagnation of free-market economies and the delayed impact of new technologies are linked.

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In the eight years since financial crisis, the response of policymakers has been to prescribe simply more of the things that caused it: more free markets and more globalisation. That is the logic that drove TTIP , that drove last week’s breakup of BT . It is the logic that drives Theresa May’s government to go on handing large chunks of the NHS to Richard Branson .

Carney is the first person with significant power in the western world to say that the medicine cannot work. It delivers slow growth, stagnating wages, falling productivity and rising inequality. Central banks, by printing money, can keep the patient alive, but it is for politicians and economists to design a new system.

Carney’s solutions, though couched in language eviscerated in order to avoid offence, boil down as follows. First, economists have to accept that the current form of capitalism is failing the 99percent. Gains from both technological progress and globalisation flow more to the rich than the poor. Second, he says, we have to stimulate growth by relying less on creating money, and more by creating growth: governments have to start using taxpayers’ money to invest, and redesign the economy so that our dire productivity is reversed. Third we have to redistribute wealth downwards instead of upwards.

If Theresa May’s government was actually listening to Carney ( instead of trying to undermine him as in reality ), they should scrap Philip Hammond’s austerity targets, raise tax revenues, shut down tax havens and take decisive measures to end the creation of low-wage, low-productive jobs. To do that you would have to re-regulate the economy and hard.

It would, in short, have to be somebody’s responsibility that 20,000 low-wage cash business appear out of nowhere; somebody has to care about it other than the police, whose raids on such businesses frequently scoop up just enough trafficked migrants to hit the headlines, but never enough to actually put the traffickers out of business, nor to raise wages.

At the same time, you would have to redistribute wealth aggressively. Not all of that needs to be done through taxation. If, instead of privatising public services, you ran them as non-profit corporations, providing rail, broadband and energy at prices below the cost of production, the redistributive effect would be significant. People on rock-bottom wages would suddenly have a lot more to live on.

On top of that you need to actively raise wages. That needs more than a worker on the board: it needs a recognised union rep in every workplace. If Amazon, Pret a Manger, the courier industry and the construction firms were obliged by law to negotiate with unions, and to cease repressing them, there would be upward pressure on wages across the whole economy. Another way of creating that pressure would be for local and national government to hike public sector pay.

Call it what you will, it would no longer be globalisation as we know it, and it would reverse 30 years of free market labour reforms. Because he cannot or will not spell this out, Carney’s intervention only does half the job.

But if we did all of the above, then what? Companies would react to rising wages by promoting rapid automation. Hand car washes would probably shrink to a couple of thousand luxury valeting operations, and the investment of petrol stations in machines would pay off. Productivity would increase. Maybe forecourts would be incentivised to invest in more machines. Maybe more of them could be built in the UK.

But then the strategic problem highlighted by Carney would kick in. What kind of work can we offer people displaced by automation?

Politicians of all stripes like to promise a future of high-value, high-skilled, high-paid work. But if the Bank of England’s economists are right, there won’t be enough of that work in the world to go around. Technology is automating tasks faster than it is creating new ones. So in a situation where global growth is stagnant, providing your own population with decent jobs means attracting them from somewhere else.

That, in turn, will mean enacting a controlled, limited and reluctant step back from freemarket globalisation. The alternative is the uncontrolled and chaotic one being promoted by Trump, Putin, Shinzo Abe and Xi Jinping. As in the 1930s, the last time a global system fragmented, this will take radical leaps of thinking among the elite – and Carney’s intervention, though constrained by his remit, is hopefully the first of many.

A new kind of capitalism, whose aim is to put the cheap labour exploiter out of business and promote high wages, will provoke howls of indignation from the economics profession and the asset-rich classes of the West. They revelled in the race to the bottom, as long as they got the upside of it. To unleash technology and revive productivity will take a big and careful rethink, above all about what redistribution policies work best in a highly complex and individualised consumer economy. But the outcome has to be better than the economics of the hand car wash.

Paul Mason is a writer and broadcaster on economics and social justice

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