Automation needs to be tackled with the economics of the 19th century

Marx versus the robots.

Since covering the strangely unimaginative way the economics establishment treated the effect of automation on the economy, I've been looking for economists who do seem to get it.

Responding to a piece by Paul Krugman (a back-of-the-envelope demonstration of how neoclassical models could show technological improvements leading to a reduction of the real wage), Fred Moseley, Professor of Economics at Massacheusettes' Mount Holyoke College, gives an overview of the Marxist approach to the problem:

Marx’s theory predicted in the early days of capitalism that technological change would tend to be labor-saving… and this labor-saving technological change would cause increasing unemployment (the “reserve army of the unemployed”) which in turn would put downward pressure on wages and the wage share of income (Capital, Volume 1, Chapter 25). He called this important conclusion “The General Law of Capital Accumulation” (the title of Chapter 25). One does not have to use the very dubious marginal productivity theory to explain these important phenomena. Marx’s theory provides a perfectly adequate explanation without the extremely problematic concepts of marginal products of labor and capital.

Marx is obviously relevant to the end stage, of a world in which automation replaced the bulk of work. That world would struggle to continue to arrange things along a capitalist order, as Noah Smith's contortions demonstrated. Ownership of the means of production — the robots, algorithms, computers and everything else replacing human labour — becomes more and more important the closer to that stage we reach.

Moseley's point is that Marx is probably relevant to the whole thing far earlier. The labour theory of value (Marx's key economic idea, that value — which is distinct from "price" — is determined exclusively by the human labour a good takes to create) has always been a lens through which technological improvement in the means of production leads, eventually, to immiseration of the labourer.

(The flip side of such an argument is that immiseration is offset by the fact that technology also reduces the amount of labour required to live a good life. The balance between those two tendencies is, in essence, the answer to the question of whether or not capitalism is sustainable or not.)

No matter how accurate it may have been in this situation, it will take a long time for most people to begin taking the Marxist economic analysis seriously. (Part of that might be that it's got that frightful déclassé word "Marxist" in it.) But if economics doesn't adopt some of its lessons, it seems doomed to spend the next decade reinventing it from scratch.

A man poses in front of a bronze statue of Karl Marx and Friedrich Engels in Berlin. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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The big problem for the NHS? Local government cuts

Even a U-Turn on planned cuts to the service itself will still leave the NHS under heavy pressure. 

38Degrees has uncovered a series of grisly plans for the NHS over the coming years. Among the highlights: severe cuts to frontline services at the Midland Metropolitan Hospital, including but limited to the closure of its Accident and Emergency department. Elsewhere, one of three hospitals in Leicester, Leicestershire and Rutland are to be shuttered, while there will be cuts to acute services in Suffolk and North East Essex.

These cuts come despite an additional £8bn annual cash injection into the NHS, characterised as the bare minimum needed by Simon Stevens, the head of NHS England.

The cuts are outlined in draft sustainability and transformation plans (STP) that will be approved in October before kicking off a period of wider consultation.

The problem for the NHS is twofold: although its funding remains ringfenced, healthcare inflation means that in reality, the health service requires above-inflation increases to stand still. But the second, bigger problem aren’t cuts to the NHS but to the rest of government spending, particularly local government cuts.

That has seen more pressure on hospital beds as outpatients who require further non-emergency care have nowhere to go, increasing lifestyle problems as cash-strapped councils either close or increase prices at subsidised local authority gyms, build on green space to make the best out of Britain’s booming property market, and cut other corners to manage the growing backlog of devolved cuts.

All of which means even a bigger supply of cash for the NHS than the £8bn promised at the last election – even the bonanza pledged by Vote Leave in the referendum, in fact – will still find itself disappearing down the cracks left by cuts elsewhere. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.