Mr. Bandoch is a student, and Dr. Block a professor of economics, at the College of the Holy Cross in Worcester, Massachusetts.
In today’s world there exists a widespread belief that new technology is creating massive unemployment and rendering human labor obsolete. This is not true.
Ideally, having machines and computers do all our dirty work would make our lives much better. After all, isn’t this why our primitive ancestors created the wheel? Some genius said one day, Hey, why should I carry this heavy burden on my back, when it can be pushed in a wheeled cart? Then his friend hit him over the head with a club and berated him for wanting to create unemployment.
According to Henry Hazlitt, the belief that new machines on net balance create unemployment is one of the biggest fallacies in economic thought. To illustrate his point, Hazlitt cites the effects of cotton-spinning machinery on cotton spinners and weavers in eighteenth-century England. When Arkwright invented his cotton-spinning machinery in 1760, it was estimated that there were 5,200 spinners using spinning wheels, and 2,700 weavers, for a total of 7,900 persons working in the production of cotton textiles. There was strong opposition to the invention on the grounds that it would bring massive unemployment to the cotton textile industry. Yet in 1787, the number of persons working as spinners and weavers of cotton had risen from 7,900 to 320,000, an increase of 4,400 percent.
Ever since man discovered fire, the purpose of technological advancement has been to make life easier for everyone. If we accepted the assessment of technophobes, we’d be in quite a predicament. Why contact someone via the telephone when we could hire somebody to hand-deliver our message? Why send cargo from Philadelphia to Boston by railroad when we could hire an enormous number of men to carry it on their backs? The anti-technology argument seems ridiculous when you look at it this way. It is in the nature of those who take pride in their work to try to increase the results they can achieve in a given number of hours. If those who fear technology accepted their own rhetoric, they would have to dismiss all progress and ingenuity not only as useless, but also vicious.
What really happens when technological improvements and labor-saving machinery are introduced? Hazlitt provides an interesting scenario. A clothing manufacturer buys a machine that makes men’s and women’s overcoats for half as much labor as was previously used. Thus, half his labor force is dropped. While this may look like a clear loss of employment, one must remember that the machine itself required labor to make it. Here, as one offset, are jobs that would not otherwise have existed. In the long run, the manufacturer will have increased his profits with the use of the machine. Hazlitt then states,
The manufacturer must use these extra profits in at least one of three ways, and possibly he will use part of them in all three: (1) he will use the extra profits to expand his operations by buying more machines to make his coats; or (2) he will invest the extra profits in some other industry; or (3) he will spend the extra profits on increasing his own consumption. Whichever of these three courses he takes, he will increase employment.
The consumers who buy the coats also save money. The machine has reduced the price of the coat, allowing the consumer to spend that saved money on other goods, thus providing increased employment in other areas. The bottom line is that machines bring an increase in production and an increase in the standard of living.
George Terborgh claims that there is one indisputable fact about technology: It creates new products, including services, and new methods of production. But will these great technological advances that help make our lives easier create massive unemployment? Terborgh doesn’t believe so. Instead, the impact technological progress has on employment is twofold: It creates jobs, but it also destroys them. For example,
. . . the thousands of new products that pour forth annually from research and development laboratories, and the hundreds of new industries they create, obviously generate a large demand for labor. On the other hand, older products and industries are displaced by their competition, with a consequent loss of jobs.
The same is true with new methods of production. The technophobes are only looking at one side of the coin. They see only the people who are being unemployed with each technological advance. They fail to see the new jobs created in other areas.
Does the gain in employment from technological advances exceed the loss? In some cases, there is no doubt that it does. But we must look at the long-run picture and the opportunities that arise from new technology. New product technology is a net creator of jobs. These innovations do not merely replace the old products they dislodge from the market, but instead develop new and expanded markets of their own. The most successful product innovations, like the telephone, automobile, and television leave their predecessor products or services so far behind in terms of both output and employment that the comparison is almost impossible.
Technology does have its supporters—sometimes unexpected ones. Testifying before Congress many years ago, labor union leader Walter Reuther spoke of how technological advances can put many desirable goals within our reach: greatly improved standards of living (including increased leisure for every family), the relative elimination of poverty in our land, rapid progress in providing the fullest educational opportunity to every child, and providing the means to make the best health care available to all.
Unfortunately, technophobes fail to see this potential. What worries them the most is the one thing that should make them the happiest. Technology will continue to reduce our sweat and toil, much as the wheel enabled our ancestors to save time and energy.
There will always be those who insist on looking only at the short-term effects, while ignoring the long-run rewards. New and better ways of doing things have the potential to render hard, tiresome labor obsolete. If this happens, we will all be able to engage in meaningful work and play that enable us to make the best use of our natural abilities. Of course, none of this discussion would be necessary if someone had just kicked the wheels off that caveman’s cart!
1. Henry Hazlitt, Economics in One Lesson (New York: Crown Publishers, Inc., 1979), p. 50.
2. Ibid., p. 54.
3. Ibid., pp. 55-56.
4. George Terborgh, Automation Hysteria and Employment Effects of Technological Progress, in Automation, Alienation, and Anomie, ed. Simon Marcson (New York: Harper and Row Publishers, 1970), p. 362.
5. Ibid., pp. 363, 364.