When Progressive Policies Cause Creative Destruction

When Progressive Policies Cause Creative Destruction

Since automation trends are primarily government-driven, non-elites who vote for progressive candidates are going to have an increasingly tough time.
Ben Weingarten

What if Progressive policies actually spurred innovation and increased productivity? What if, in so doing, the end result will be displacing the very constituents on which progressives most rely?

If you read The Transom avidly, as I do, you will note two trends in America on a collision course, the implications of which have not yet been deeply considered in context of American political economy.

These two trends are the increasing cost of labor broadly, through things like ballooning health-care costs and increasing minimum wages, and a shift towards automation across all sectors, in particular those in which low-skill labor is preponderant.

Go to your local airport and you may enter a restaurant in which your menu is an iPad, and your only human interaction is with a server who walks your meal from the kitchen to your table. This is only the most basic—and not even most efficient—example of the sea change that is coming concerning the provision of all manner of goods and services.

Businesses Need to Make Up for Taxes Somehow

For years now, we have seen headlines foretelling a doomsday scenario in which mass numbers of Americans are thrown out of work, replaced by computers, robots, and other time-saving, liability-minimizing machines. Human capital is not static, and not all process changes will happen all at once. Different industries evolve at different speeds, and human beings are adaptive. Yet it is only natural that businesses need continually seek ways to lower costs to profit and survive, and automation is a key means by which to do so.

The ‘deadweight loss’ attributable to taxes and hyper-regulation means automation will become far cheaper than having to hire, train, and pay severance to human beings.

In an age in which the “deadweight loss” attributable to taxes, compliance, and hyper-regulation is massive, automation will become far cheaper than having to hire, train, and pay severance to human beings. Since regulation is the mother of innovation, so artificially high costs from other forms of government intervention will force businesses to innovate by first replacing full-time workers with temporary ones, and eventually with cost-effective machines that do not require health and welfare benefits and pensions.

This presents an interesting conundrum for a Progressive coalition that relies in part upon the very poor. To the degree to which large-scale Progressive reforms like Obamacare and the recently popular $15 minimum wage raises the cost of doing business, the move to automate will only accelerate, hurting most those lower-skilled, generally poorer constituencies, which happen to be politically Progressive. This “creative destruction” will be an unwelcome development to many manual laborers, a betrayal to the Progressive political class.

Cynics Say Joblessness Furthers the Progressive Cause

The cynical person might say that increasing joblessness would work to the Left’s advantage, creating a larger population of people reliant on government (read: their fellow citizens plus U.S. Treasury buyers) for basic necessities and entitlements. The cynical person might be right, large populations of disgruntled and dependent citizens be damned.

In a time of increasing joblessness attributable to Progressive policies, one suspects businessmen would be the biggest scapegoat.

Moreover, some Progressive true believers would likely argue that even if economics shows damaging effects to laws like the minimum wage, intent often matters more than outcome.

In a time of increasing joblessness attributable to Progressive policies, one suspects businessmen would be the biggest scapegoat, harangued by politicians as evil and greedy for throwing hardworking Americans out of the workforce just to improve their profit margins. This would likely lead to a push for Progressive policies with even more regressive outcomes, in a vicious cycle of can-you-top-this interventions.

Perhaps there would be a Reagan Robot Tax, as in “If the robot moves, tax it, too.” One of the political advantages of taking a positive view of law is that for every nail there is a hammer—intervention in response to one crisis creates another crisis, the impetus for still further intervention, and on and on ad infinitum.

It’s Not All Doom and Gloom

But a loyal opposition has a political opportunity, as well. It could learn a lot from the recent campaign in New York against Mayor de Blasio’s efforts to cap the number of Uber drivers, lest they threaten the yellow cab cartel.

Playing to the prejudices of Progressive Gothamites, Uber ran ads showing that Mayor de Blasio’s cap would hurt most those whom progressives purport to most want to help—low-income racial, ethnic, and gender minorities just trying to make a living. The ads Uber ran were not only economically sound, but gripping. Indeed, in politics idealism trumps materialism, and emotion often trumps reason. But it is doubly powerful when emotion and reason are aligned.

Those of us who believe in defending free markets have a responsibility to make both cases, and we ought to point out at every instance that the rapid move toward automation, the “sharing economy,” temporary work, and a host of other jarring changes are in large part exacerbated by, if not largely attributable to, Progressive policies. Again, automated solutions are comparatively cheaper and less risky than workers who require wages, may be hired for reasons other than merit, create endless streams of mandated filings, may file lawsuits, etc.

Note that the world did not collapse when automobiles replaced horse-drawn carriages.

If innovation is inevitable—just not as immediately essential or economically viable in the absence of leftist policies weighing businesses down—the question will be how lower-skilled workers will profit under a robotic revolution. In other words, progressives will claim that if there is economic progress, the underclass will drown.

This Luddite response, antithetical to “progress,” was also in vogue during the Industrial Revolution. Note that the world did not collapse when automobiles replaced horse-drawn carriages. The complexity of human action, and its coordination through markets and the price mechanism along with man’s yearning to self-actualize through his work, have historically refuted such arguments. We human beings are not the dim-witted sheep that Progressive technocrats would have us believe.

What Creative Destruction Creates

Moreover, the benefits of entrepreneurial innovation in yielding superior goods and services at declining prices (in the process creating new jobs and generally increasing productivity) ultimately accrue to everyone, and perhaps to a disproportionate degree to low-skilled laborers. The seen of technological advancement may be the destruction of extant jobs, but the unseen is the creation of new ones in businesses that grow up around improved technology (which must be marketed, operated, and serviced), and the resources freed up to build entirely new and more impactful industries.

We should champion innovation, but also note that its benefits are not being widely shared because the soil of our nation is not fertile for long-term growth.

To stand with incumbent, protected businesses against innovative upstarts is antithetical to the dynamic and enterprising culture that defines the American spirit. We should champion innovation, but also note that its benefits are not being widely shared because the soil of our nation is not fertile for long-term growth: Namely a sound currency, low tax rates, respect for private property and the rule of law, and minimal government intervention ensuring that both profits and losses remain private.

That our Progressive educators perpetuate the belief in the primacy of the state, engendering in our elites anti-capitalist sentiments that now pervade all of American culture does not help, either.

What innovation we do have today occurs only in spite of or as a reaction to distortive government policies, but real, healthy growth is very limited, primarily reserved to the technology sector into which Washington’s tentacles have not yet fully reached.

To the degree to which the trends we are seeing in the economy today are primarily government-driven, non-elites are going to have an increasingly tough time. Progressive policies are to blame, and we should be making the case for freedom as the antidote for broad-based growth and the tonic for the health and happiness of our nation.

Ben Weingarten is a Federalist senior contributor, senior fellow at the London Center for Policy Research, and fellow at the Claremont Institute. He was selected as a 2019 Robert Novak Journalism fellow of the Fund for American Studies, under which he is currently working on a book on U.S.-China policy. You can find his work at benweingarten.com, and follow him on Twitter @bhweingarten.

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