China Torpedoing the Emergence of a Middle Class?

Calling yourself a diaosi has also become a proud statement of solidarity with the masses against the perceived corruption of the wealthy. The word itself entered the language only recently, appealing to office grunts across the country, especially in the IT industry. A mostly male species, diaosi are often daydreamers with poor social skills and an obsession with online gaming. They are slightly different from Japan’s marriage-shunning “herbivore” young men in that fewer of them have chosen their station in life. Society has chosen it for them, especially with property prices climbing well beyond their reach. Several recent studies show that, while incomes across Chinese society continue to rise, social mobility has worsened. Yi Chen of Nanjing Audit University and Frank A. Cowell of the London School of Economics found that, since 2000, people at the bottom of society were more likely than in the 1990s to stay where they were. “China has become more rigid,” they conclude.

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NY Times OpEd: Is Technology Ruining the Middle Class?

In the four years since the Great Recession officially ended, the productivity of American workers — those lucky enough to have jobs — has risen smartly. But the United States still has two million fewer jobs than before the downturn, the unemployment rate is stuck at levels not seen since the early 1990s and the proportion of adults who are working is four percentage points off its peak in 2000.

This job drought has spurred pundits to wonder whether a profound employment sickness has overtaken us. And from there, it’s only a short leap to ask whether that illness isn’t productivity itself. Have we mechanized and computerized ourselves into obsolescence?

Are we in danger of losing the “race against the machine,” as the M.I.T. scholars Erik Brynjolfsson and Andrew McAfee argue in a recent book? Are we becoming enslaved to our “robot overlords,” as the journalist Kevin Drum warned in Mother Jones? Do “smart machines” threaten us with “long-term misery,” as the economists Jeffrey D. Sachs and Laurence J. Kotlikoff prophesied earlier this year? Have we reached “the end of labor,” as Noah Smith laments in The Atlantic?

Of course, anxiety, and even hysteria, about the adverse effects of technological change on employment have a venerable history. In the early 19th century a group of English textile artisans calling themselves the Luddites staged a machine-trashing rebellion. Their brashness earned them a place (rarely positive) in the lexicon, but they had legitimate reasons for concern.

Economists have historically rejected what we call the “lump of labor” fallacy: the supposition that an increase in labor productivity inevitably reduces employment because there is only a finite amount of work to do. While intuitively appealing, this idea is demonstrably false. In 1900, for example, 41 percent of the United States work force was in agriculture. By 2000, that share had fallen to 2 percent, after the Green Revolution transformed crop yields. But the employment-to-population ratio rose over the 20th century as women moved from home to market, and the unemployment rate fluctuated cyclically, with no long-term increase.

Labor-saving technological change necessarily displaces workers performing certain tasks — that’s where the gains in productivity come from — but over the long run, it generates new products and services that raise national income and increase the overall demand for labor. In 1900, no one could foresee that a century later, health care, finance, information technology, consumer electronics, hospitality, leisure and entertainment would employ far more workers than agriculture. Of course, as societies grow more prosperous, citizens often choose to work shorter days, take longer vacations and retire earlier — but that too is progress.

So if technological advances don’t threaten employment, does that mean workers have nothing to fear from “smart machines”? Actually, no — and here’s where the Luddites had a point. Although many 19th-century Britons benefited from the introduction of newer and better automated looms — unskilled laborers were hired as loom operators, and a growing middle class could now afford mass-produced fabrics — it’s unlikely that skilled textile workers benefited on the whole.

Fast-forward to the present. The multi-trillionfold decline in the cost of computing since the 1970s has created enormous incentives for employers to substitute increasingly cheap and capable computers for expensive labor. These rapid advances — which confront us daily as we check in at airports, order books online, pay bills on our banks’ Web sites or consult our smartphones for driving directions — have reawakened fears that workers will be displaced by machinery. Will this time be different?

Go read.  The New Artisans is a concept which needs to be expanded on.  I'll do that as my Fifth Crazy Thought, I think.  However, I need to return to the Fourth Crazy Thought (I made a booboo and I'll do my mea culpa and I have been communicating with the principle investigator on a project which ran a simulation of a very large neural net recently on Riken).