The link between technology and the recession
The best way to get a mental grasp about the current financial crisis is to look at a few past recessions and depressions. The most famous being the great depression of the 1930s but equally interesting is a much smaller recession that happened in England following the invention of the spinning jenny.
James Hargraves invented the spinning jenny in 1764. It could spin yarn eight times faster with the same amount of labour. The initial economic impact was that the price of yarn dropped and many yarn spinners lost their jobs. Violent riots ensued, many of the new machines were smashed and Mr Hargraves was forced to flee for his life.
Eventually the demand for yarn grew and because textiles were now significantly cheaper people started to consume more. Wild radical consumerist ideas such as changing your underwear weekly started. A regular change of clothes became possible for the common man. The industrial textile industry of the late 18th century was the fastest growing segment of the economy and was one of the driving forces that lead the UK into the industrial revolution.
What technology does is increase the efficiency with which we can produce more goods and services. If we do not consume more, we have a surplus of labour and people lose their jobs.
The same pattern repeated itself in the early 20th century. There were more new technological inventions in the late 19th and early 20th century than ever before. Combustion engine, production lines, transatlantic flights, radio and many others increased productivity. The biggest increase in output as a result of technological efficiency was the automobile sector where output of automobiles increased ten fold. Tractors and mechanization of farms increased the efficiency of food production.. Between 1923 and 1930 output per laborer increased 25%. However take home pay only increased by 8%.
The first person to predict the coming of the depression in the thirties was Henry Ford. He pointed out that even though technology now enabled factories to produce so much more, the average person could not afford to buy all the goods being manufactured.
In 1933 when throwing his support behind the industrial recover act Henry Ford stated ”The factories are not stopped for the lack of money, but the lack of orders. Money loaned at the top means nothing. Money spent at the bottom starts everything.” (1)
Eventually the world economies got out of their financial crisis because people started to consume more. Initially it was in the form of a wartime economy. More bombs, tanks, planes were produced, but after the war a new consumerist culture emerged. More cars, televisions, suburban homes, plastic Barbie dolls and other land fill fillers.
Today the new technology that is making it possible to produce more product with less labour is the internet. Now instead of needing a shop to sell your products all you need is a snazzy website and a gigantic automated warehouse with far less employees. The line up at the airport also goes quicker thanks to the internet, now you can print your boarding pass online, fewer employees required. From shopping to production fewer people are employed in the production of product. Thanks to online news, newspapers are going bankrupt. DVD stores are also fast becoming a thing of the past. Another example I experience just yesterday was while visiting my local bank, I noticed how few customers where there. I asked the teller what happened to all the lineups ? “oh she replied”, these days more of our customers are using on line banking.”
The internet is making us more efficient than ever before. We can produce far more product with less labout, but until we start consuming more there is going to be rising unemployment.
So what is the solution. In the past the solution is to both encourage and enable increased amounts of consumerism. If we can produce more with less labour then we need to get people to consume more. Historically it has been done by the use of marketing and other need creation strategies. It has also involved better financial empowerment of the average consumer so that they can buy more stuff and get those factories rolling again.
But we now have a new and far more desire state of affairs. The thing that we are consuming is the planet itself.
what we have been consuming is the planet itself. According the UN millennium report 60% of the worlds ecosystems are in substantial decline. According to a study done by Dalhousie University the worlds stock of large fish has decreased by 90%. Even the USA intelligence agency is warning that we will be facing series water shortages by 2025. What got us out of previous depressions and recessions is that people started to consumed more. If current surplus production capacity is balanced with increased consumption our ecological footprint will increase faster than it has ever done before.(3) World leaders are frantically trying to find new ways for consumers to return to their dutiful roles of spending more and more. If they succeed we are going to have a much bigger problem to deal with.
So then what is the solution ?
Share the Work. Instead of us all trying to work longer and harder, lets share the work. This way we can reduce unemployment.
Work less, produce less, consume less and live more. With better income distribution we can all have happier, healthier and less ecologically detrimental lives.
