Thanks to interconnected computers that are able to compute and communicate at incredibly low costs, we have entered a time of what I’ll call deep automation. The story of modern economies has always been a story of automation, of course, but what what’s going on today goes far beyond anything that’s happened before. We don’t know what the consequences will be, but the persistent, high levels of unemployment in developed economies may well be a symptom of deep automation.
In a provocative article in the new issue of the McKinsey Quarterly, W. Brian Arthur argues that computer automation has in effect created a “second economy” that is, slowly, silently, and largely invisibly, beginning to supplant the primary, physical economy:
I want to argue that something deep is going on with information technology, something that goes well beyond the use of computers, social media, and commerce on the Internet. Business processes that once took place among human beings are now being executed electronically. They are taking place in an unseen domain that is strictly digital. On the surface, this shift doesn’t seem particularly consequential—it’s almost something we take for granted. But I believe it is causing a revolution no less important and dramatic than that of the railroads … There’s no upper limit to this, no place where it has to end. Now, I’m not interested in science fiction, or predicting the singularity, or talking about cyborgs. None of that interests me. What I am saying is that it would be easy to underestimate the degree to which this is going to make a difference.
The computer system is, Arthur argues, “intelligent” in only the most basic sense of that word – intelligence defined as the ability of a thing to change its state in response to a stimulus. But, when spread across such enormous and enormously fast information-processing capacity, even that rudimentary degree of intelligence is enough to take over many traditionally human activities, even highly sophisticated ones: “Physical jobs are disappearing into the second economy, and I believe this effect is dwarfing the much more publicized effect of jobs disappearing to places like India and China.” So far, moreover, this new wave of automation, unlike the automation of manual labor during and after the industrial revolution, doesn’t seem to be creating large numbers of good new jobs to replace those it’s supplanting.
That means that, as a society, we now face a very different kind of economic challenge than we’ve faced in recent history:
The second economy will certainly be the engine of growth and the provider of prosperity for the rest of this century and beyond, but it may not provide jobs, so there may be prosperity without full access for many. This suggests to me that the main challenge of the economy is shifting from producing prosperity to distributing prosperity. The second economy will produce wealth no matter what we do; distributing that wealth has become the main problem. For centuries, wealth has traditionally been apportioned in the West through jobs, and jobs have always been forthcoming. When farm jobs disappeared, we still had manufacturing jobs, and when these disappeared we migrated to service jobs. With this digital transformation, this last repository of jobs is shrinking—fewer of us in the future may have white-collar business process jobs—and we face a problem.
Arthur is optimistic that we will be able to figure out a way to solve that problem, though the solution is by no means clear at this point. Distributing prosperity, as we’re seeing today, is not one of America’s traditional strengths – and, indeed, the entire idea is viewed with great suspicion. But if Arthur’s analysis is right – and if we don’t find a solution to the problem – Occupy Wall Street may be just a taste of what’s to come.