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.

Photo: Getty
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What's going on in Northern Ireland?

Everything you need to know about why Northern Ireland is heading for an early election - and how it all works. 

Northern Irish voters will elect a new government, just seven months after the last election. Here’s what you need to know.

It all starts with something called the Renewable Heat Incentive (RHI), a scheme designed to encourage businesses to switch to renewable sources of heating, by paying them to do so. But the plan had two flaws. Firstly, there was no upper limit to how much you could receive under the scheme and secondly there was no requirement that the new heaters replace the old.

That led to businesses installing biomass boilers to heat rooms that had previously not been heated, including storage rooms and in some cases, empty sheds.

 The cost of the scheme has now run way over budget, and although the door has been closed to new entrants, existing participants in the scheme will continue collecting money for the next 20 years, with the expected bill for the Northern Irish assembly expected to reach £1bn.  

The row is politically contentious because Arlene Foster, leader of the Democratic Unionist Party, and the First Minister of Northern Ireland, was head of the Department for Enterprise, Trade and Investment (DETI) when the scheme was rolled out, putting her at the heart of the row. Though there is no suggestion that she personally enriched herself or her allies, there are questions about how DETI signed off the scheme without any safeguards and why it took so long for the testimony of whistleblowers to be acted on.

The opposition parties have called for a full inquiry and for Foster to step down while that inquiry takes place, something which she has refused to do. What happened instead is that the Deputy First Minister, Martin McGuinness, resigned his post, he said as a result of frustration with the DUP’s instrangience about the scheme.

Under the rules of the devolved assembly (of which, more below), the executive – the ministers tasked with running the government day-to-day must be compromised of politicians drawn from the parties that finish first and second in the vote, otherwise the administration is dissolved.  McGuinesss’ Sinn Fein finished second and their refusal to continue participating in the executive while Foster remains in place automatically triggers fresh elections.

Northern Ireland uses the single transferable vote (STV) to elect members of the legislative assembly (MLAs). Under STV, multiple MLAs are elected from a single constituency, to more accurately reflect the votes of the people who live there and, crucially, to prevent a repeat of the pattern of devolved rule under first-past-the-post, when prolonged one-party rule by the Unionist and Protestant majority contributed to a sense of political alienation among the Catholic minority.

Elections are contested across 18 seats, with five MPs elected to every seat. To further ensure that no part of the community is unrepresented in the running of the devolved assembly, the executive, too, is put together with a form of proportional representation. Not only does the executive require a majority in the legislature to pass its business, under a system of “mandatory coalition”, posts on the executive are allocated under the D’Hondt system of proportional representation, with posts on the executive allocated according to how well parties do, with the first party getting first pick, and so on until it comes back to the first party until all the posts are filled.

Although the parties which finish third and lower can opt out of taking their seats on the executive and instead oppose the government, if the first and second party don’t participate in the coalition, there is no government.

As it is highly unlikely that the DUP and Sinn Fein will not occupy the first and second places when the election is over, it is equally unlikely that a second election will do anything other than prolong the chaos and disunity at Stormont. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.