Automation, Financialization, and Institutional Change: Challenges for Progressive Policy

Abstract:

This article argues that the issue of “technological unemployment” resulting from automation is the result of ceremonial encapsulation within the process of progressive institutional adjustment. While institutions of production have adjusted to account for new technological developments, institutions of distribution have not. As discussed here, the main cause of this lack of adjustment is a financialized economy, in which shareholder returns motivate and dominate economic decision making and activity. As a result, gains and benefits from technological advances exacerbate existing income inequality and reduces the power of labor. I discuss this issue in detail before explaining how progressive policies that divorce private wage-labor from access to the system of social provisioning may serve to smooth this process of institutional adjustment caused by the introduction of automated processes.

Keywords:

• financialization
• automation
• technological unemployment
• institutional change
• job guarantee

JEL Classification Codes:

• B52
• I38
• P16

Notes

1 It should be noted that the fear of automation harming labor is not new. David Ricardo in his Principles of Political Economy and Taxation ([1817] 2004), for example, famously included a chapter “On Machinery” in which he discusses how the introduction of machinery could reduce the amount of surplus devoted to labor.

2 Working-age non-college educated male employment rates are typically used as a proxy for automation as they tend to work in jobs that have the highest risk of automation (West 2018).

3 “Technology” is used here in the Ayresian definition as a set of tool-skill combinations. It is a “mode of doing” (Ayres 1953, 282) and considered a learned behavior.

4 It is recognized here that the term “institution” is a point of contention among institutionalists (Tauheed 2013). In line with Foster’s theory the term “institution” is used here to mean correlated patterns of behavior, in which behaviors are connected through a system of values that define how these behaviors occur. See Bush (1983) for more on this approach.

5 Foster (1981b) refers to this as the principle of technological determination. To avoid confusion with more modern usages of the phrase, this principle is renamed “instrumental primacy” (Sturgeon 2009).

6 The wholesale and retail trade category includes restaurant employment, while professional services does not include finance and real estate, education, domestic service, or personal services.

7 There are a large slate of UBI policies, ranging from the Negative Income Tax to 2020 Democratic Presidential Candidate Andrew Yang’s true UBI proposal of $1,000 per person per month (Mitchell 2019). Each of these programs effectively boils down to a direct cash subsidy from the federal government.

Additional information

Notes on contributors

Avraham Izhar Baranes

Avraham Izhar Baranes is at Elmhurst College.