have a read folks:
an abridged chapter from economics in one lesson, by henry hazlitt:
"The Curse of Machinery
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Among the most viable of all economic delusions is the belief that machines ... create unemployment...
This fallacy is still the basis of many labor union practices...
Not only must we be causing unemployment with every technological improvement we make, but primitive man must have started causing it with the first efforts he made to save himself from needless toil and sweat.
To go no further back, let us turn to Adam Smith's The Wealth of Nations, published in 1776. The first chapter of this remarkable book is called "Of the Division of Labor," and on the second page of this first chapter the author tells us that a workman unacquainted with the use of machinery employed in pin-making "could scarce make one pin a day, and certainly could not make twenty," but that with the use of this machinery he can make 4,800 pins a day.
So already, alas, in Adam Smith's time, machinery had thrown from 240 to 4,800 pin-makers out of work for every one it kept. In the pin-making industry there was already, if machines merely throw men out of jobs, 99.98 per cent unemployment. Could things be blacker?
Things could be blacker, for the Industrial Revolution was just in its infancy. Let us look at some of the incidents and aspects of that revolution. Let us see, far example, what happened in the stocking industry.
New stocking frames as they were introduced were destroyed by the handicraft workmen (over 1,000 in a single riot), houses were burned, the inventors were threatened and obliged to fly for their lives, and order was not finally restored until the military had been called out and the leading rioters had been either transported or hanged.
Now it is important to bear in mind that in so far as the rioters were thinking of their own immediate or even longer futures their opposition to the machine was rational. For William Felkin, in his History of the Machine-Wrought Hosiery Manufactures (1867), tells us (though the statement seems implausible) that the larger part of the 50,000 English stocking knitters and their families did not fully emerge from the hunger and misery entailed by the introduction of the machine for the next forty years.
But in so far as the rioters believed, as most of them undoubtedly did, that the machine was permanently displacing men, they were mistaken, for before the end of the nineteenth century the stocking industry was employing at least a hundred men for every man it employed at the beginning of the century.
Arkwright invented his cotton-spinning machinery in 1760. At that time it was estimated that there were in England 5,200 spinners using spinning wheels, and 2,700 weavers -- in all, 7,900 persons engaged in the production of cotton textiles.
The introduction of Arkwright's invention was opposed on the ground that it threatened the livelihood of the workers, and the opposition had to be put down by force. Yet in 1787 -- twenty-seven years after the invention appeared -- a parliamentary inquiry showed that the number of persons actually engaged in the spinning and weaving of cotton had risen from 7,900 to 320,000, an increase of 4,400 per cent...
In the depression of 1932, the game of blaming unemployment on the machines started all over again...
If it were indeed true that the introduction of labor saving machinery is a cause of constantly mounting unemployment and misery, the logical conclusions to be drawn would be revolutional, not only in the technical field but for our whole concept of civilization.
Not only should we have to regard all further technical progress as a calamity; we should have to regard all past technical progress with equal horror.
Every day each of us in his own capacity is engaged in trying to reduce the effort it requires to accomplish a given result. Each of us is trying to save his own labor, to economize the means required to achieve his ends. Every employer, small as well as large, seeks constantly to gain his results more economically and efficiently -- that is, by saving labor. Every intelligent workman tries to cut down the effort necessary to accomplish his assigned job. The most ambitious of us try tirelessly to increase the results we can achieve in a given number of hours.
The technophobes, if they were logical and consistent, would have to dismiss all this progress and ingenuity as not only useless but vicious.
Why should freight be carried from New York to Chicago by railroads when we could employ enormously more men, for example, to carry it all on their backs?
Theories as false as this are never held with logical consistency, but they do great harm because they are held at all. Let us, therefore, try to see exactly what happens when technical improvements and labor-saving machinery are introduced. The details will vary in each instance, depending upon the particular conditions that prevail in a given industry or period. But we shall assume an example that involves the main possibilities.
Suppose a clothing manufacturer learns of a machine that will make men's and women's overcoats for half as much labor as previously. He installs the machines and drops half his labor force.
This looks at first glance like a clear loss of employment. But the machine itself required labor to make it; so here, as one offset, are jobs that would not otherwise have existed.
The manufacturer, however, would have adopted the machine only if it had either made better suits for half as much labor, or had made the same kind of suits at a smaller cost. If we assume the latter, we cannot assume that the amount of labor to make the machines was as great in terms of payrolls as the amount of labor that the clothing manufacturer hopes to save in the long run by adopting the machine; otherwise there would have been no economy, and he would not have adopted it.
So there is still a net loss of employment to be accounted for. But we should at least keep in mind the real possibility that even the first effect of the introduction of labor?saving machinery may be to increase employment on net balance; because it is usually only in the long run that the clothing manufacturer expects to save money by adopting the machine: it may take several years for the machine to "pay for itself."
After the machine has produced economies sufficient to offset its cost, the clothing manufacturer has more profits than before. (We shall assume that he merely sells his coats for the same price as his competitors, and makes no effort to undersell them.) At this point, it may seem, labor has suffered a net loss of employment, while it is only the manufacturer, the capitalist, who has gained.
But it is precisely out of these extra profits that the subsequent social gains must come. The manufacturer must use these extra profits in at least one of three ways, and possibly he will use part of them in all three:
(1) he will use the extra profits to expand his operations by buying more machines to make more coats; or
(2) he will invest the extra profits in some other industry; or
(3) he will spend the extra profits on increasing his own consumption. Whichever of these three courses he takes, he will increase employment.
In other words, the manufacturer, as a result of his economies, has profits that he did not have before. Every dollar of the amount he has saved in direct wages to former coat makers, he now has to pay out in indirect wages to the makers of the new machine, or to the workers in another capital industry, or to the makers of a new house or motor car for himself, or of jewelry and furs for his wife. In any case (unless he is a pointless hoarder) he gives indirectly as many jobs as he ceased to give directly.
But the matter does not and cannot rest at this stage. If this enterprising manufacturer effects great economies as compared with his competitors, either he will begin to expand his operations at their expense, or they will start buying the machines too. Again more work will be given to the makers of the machines.
But competition and production will then also begin to force down the price of overcoats. There will no longer be as great profits for those who adopt the new machines. The rate of profit of the manufacturers using the new machine will begin to drop, while the manufacturers who have still not adopted the machine may now make no profit at all. The savings, in other words, will begin to be passed along to the buyers of overcoats ?- to the consumers.
But as overcoats are now cheaper, more people will buy them. This means that, though it takes fewer people to make the same number of overcoats as before, more overcoats are now being made than before. If the demand for overcoats is what economists call "elastic" -- that is, if a fall in the price of overcoats causes a larger total amount of money to be spent on overcoats than previously -- then more people may be employed even in making overcoats than before the new labor-saving machine was introduced. We have already seen how this actually happened historically with stockings and other textiles.
But the new employment does not depend on the elasticity of demand for the particular product involved. Suppose that, though the price of overcoats was almost cut in half -- from a former price, say, of $75 to a new price of $50 -- not a single additional coat was sold. The result would be that while consumers were as well provided with new overcoats as before, each buyer would now have $25 left over that he would not have had left over before.
He will therefore spend this $25 for something else, and so provide increased employment in other lines.
In brief, on net balance machines, technological improvements, automation, economies and efficiency do not throw men out of work...
Yet it is a misconception to think of the function or result of machines as primarily one of creating jobs.
The real result of the machine is to increase production, to raise the standard of living, to increase economic welfare.
It is no trick to employ everybody, even (or especially) in the most primitive economy.
Full employment -- very full employment; long, weary, back-breaking employment -- is characteristic of precisely the nations that are most retarded industrially..."
economics in one lesson is a great book. it's comprised of 30 or so short chapters like this one debunking common myths about the market. there is an abridged version available online here: http://www.chariscorp-wordgems.com/wealth.hazlitt.html
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