Automation and the Future of Work. Aaron Benanav
and more is produced with fewer workers, as the automation theorists claim, but not because technological change has given rise to high rates of productivity growth. Far from it—productivity growth in manufacturing has appeared rapid only because the yardstick of output growth, against which it is measured, has been shrinking.
Following economist Robert Brenner, I argue that global waves of deindustrialization find their origins not in runaway technical change, but first and foremost in a worsening overcapacity in world markets for manufactured goods.28 The rise in overcapacity developed stepwise after World War II. In the immediate postwar period, the United States hosted the most dynamic economy in the world, with the most advanced technologies: in 1950, output per hour worked in the US economy was more than twice as high as output per hour in European countries.29 Under the threat of Communist expansion within Europe, as well as in East and Southeast Asia, the US proved willing to share its technological largesse with its former imperial competitors Germany and Japan, as well as with other “frontline” countries, in order to bring them all under the US security umbrella.30 In the first few decades of the post–World War II era, these technology transfers were a major boost to economic growth in European countries and Japan, opening up opportunities for rapid export-led expansion. This strategy was supported by the devaluation of their currencies against the dollar in 1949, which improved these countries’ international competitiveness at the expense of domestic, working-class buying power (a move that in many European countries led to the eviction of left political parties from government).31 However, as Brenner has argued, rising manufacturing capacity across the globe quickly generated overcapacity, issuing in a “long downturn” in manufacturing-output growth rates.
What mattered here was not only the later build-out of manufacturing capacity in the global South, but the earlier creation of such capacity in countries like Germany, France, Italy, and Japan. These countries hosted the first low-cost producers in the postwar era to succeed, first, in taking shares in global markets for industrial goods and, second, in invading the previously impenetrable US domestic market. Due to rising competition with lower-cost producers, rates of industrial output growth in the US began to decline starting in the late 1960s, issuing in deindustrialization in employment terms. As the US responded to heightened import penetration in the early 1970s by breaking up the Bretton Woods order and devaluing the dollar—which increased US firms’ international competitiveness—these same problems spread from North America and northwestern Europe to the rest of the European continent and Japan.32
Intensifying competition among firms in these high-income regions did not dissuade more countries from building up manufacturing capacity, adopting export-led growth strategies, and entering global markets for manufactured goods. As additional manufacturing capacity appeared and entered the fray of international competition, falling rates of manufacturing-output growth and consequent labor deindustrialization spread to more regions: Latin America, the Middle East, Asia, and Africa, as well as to the global economy taken as a whole. Deindustrialization came to most global South regions in the aftermath of the 1982 Third World debt crisis, amid the imposition of IMF-led structural adjustment programs. As trade liberalization opened the borders of poorer countries to imports, while financial liberalization brought hot money flowing into “emerging markets,” their currencies revalued sharply. Unit labor costs in these regions rose just as markets were becoming more overcrowded, with the result that firms found themselves able neither to compete with imports nor to export their wares abroad.33
Deindustrialization was a matter not only of technological advance, but also of global redundancy of productive and technological capacities. In more crowded international markets, rapid rates of industrial expansion became more difficult to achieve.34 The mechanism transmitting this problem across the world was depressed prices in global markets for manufactured goods (which also explains why shifting currency valuations played such a major role in determining competitiveness).35 As Harvard economist Dani Rodrik notes, “Developing countries ‘imported’ deindustrialization from the advanced countries” because they were “exposed to the relative price trends” coming from the capitalist core.36
Everywhere, depressed prices for manufactures led to falling income-per-unit capital ratios (falling capital productivity), then to falling rates of profit, then to lower rates of investment, and finally to lower output growth rates.37 In this environment, firms faced heightened competition for market share: as overall growth rates slowed, the only way for new firms to grow quickly was to steal market shares from established firms. The latter responded by retreating to the apex of global value chains. Overcapacity explains why, from the early 1970s, productivity growth rates fell less severely than output growth rates. Firms either raised their productivity levels as best they could—in an effort to keep up with their competitors despite the slower growth of the demand for their products—or else went under, disappearing from statistical averages.38 The implementation of technological innovations, although occurring at a slower pace than before, generated sector-wide job loss.39 As output growth rates fell toward (and in many cases below) productivity growth rates, in one country after another, deindustrialization spread worldwide.
Explaining global waves of deindustrialization in terms of global overcapacity rather than industrial automation allows us to understand a number of features of this phenomenon that otherwise appear paradoxical. For example, rising overcapacity explains why deindustrialization has been accompanied not only by ongoing efforts to develop new labor-saving technologies, but also by the build-out of gigantic, labor-intensive supply chains—usually with a more damaging environmental impact.40 A key turning point in that story came in the 1960s, when low-cost Japanese and German products invaded the US domestic market, sending the US industrial import penetration ratio soaring from less than 7 percent in the mid ’60s to 16 percent in the early ’70s.41 From that point forward, it became clear that high levels of labor productivity would no longer serve as a shield against competition from lower-wage countries. The firms that did best in this context were the ones that responded by globalizing production. Facing competition on prices, US multinational corporations (MNCs) built international supply chains, shifting the more labor-intensive components of their production processes abroad and playing suppliers against one another to achieve the best prices.42 In the mid ’60s the first export-processing zones opened in Taiwan and South Korea. Even Silicon Valley, which formerly produced its computer chips locally in the San Jose area, shifted its production to low-wage areas, using lower grades of technology while benefiting from laxer laws around pollution and workers’ safety.43 MNCs in Germany and Japan adopted similar strategies, which were everywhere supported by new transportation and communication infrastructures.44 The globalization of production allowed the world’s wealthiest economies to retain manufacturing capacity, but it did not reverse the overall trend toward labor deindustrialization. As supply chains were built out across the world, firms in more and more countries were pulled into the swirl of world market competition. In some countries, this move was accompanied by shifts in the location of new plants: rust belts, oriented toward production for domestic markets, went into decline; sun belts, integrated into global supply networks, expanded dramatically. Chattanooga grew at the expense of Detroit, Juárez at the expense of Mexico City, Guangdong at the expense of Dongbei.45 Yet given the overall slowdown in rates of world market expansion, this reorientation toward the world market resulted in lackluster outcomes: the rise of sun belts failed to balance out the decline of rust belts, resulting in global deindustrialization.
At the same time, global manufacturing overcapacity explains why the countries that have succeeded in attaining a high degree of robotization are not those that have seen the worst degree of deindustrialization. Measured in terms of robots deployed per thousand workers in manufacturing, South Korea (63), Germany (31), and Japan (30) had advanced much further along the road to full automation, as compared to the United States (19) and UK (7), in 2016. Yet manufacturing employment shares in that same year were significantly higher in South Korea (17 percent), Germany (17 percent), and Japan (15 percent) than in the US (8 percent) and UK (8 percent). In the context of intense global competition, high degrees of robotization translate into international competitive advantages, helping firms win larger shares of world markets for the goods they produce. Unlike workers in the United States, workers in European