Automation,digitalrevolutionandcapitalconcentration:Theelephantintheroom–Araceforthemachine?

paperbyProf.JensLowitzsch,EuropeanUniversityViadrina(Lowitzsch@europa-uni.de)

Automationdigitalrevolutionandcapitalconcentration:Theelephantintheroom–Araceforthemachine?

PaperpreparedforthepublichearingoftheCommitteeonEmploymentandSocialAffairsoftheEuropeanParliamenton“Employeefinancialparticipationintheageofdigitalisation”

byProf.JensLowitzsch,EuropeanUniversityViadrina(Lowitzsch@europa-uni.de)

AbstractSince the industrial revolutionbegan, productive capital in the formofmachines, structures andsystemshasassumedanevermoredominantroleintheindustrialprocessascomparedtolabour.Consequently, theownersof thesenon-humanproductiveassetsreceiveagrowingshareofmar-ket-sourcedincome,withanever-smallerproportiongoingtotheownersofhumanlabourpower.The shift between factors of production in favour of capital is exacerbatedby technological pro-gressanditsembodimentinautomation.Recentacademicworkonlabour’sdecliningincomesharehasemphasizedtheroleofcapitalaccumulationandcapital-augmentingtechnicalchange,whichisbiasedagainst those lessskilledand lesseducated. This is consistentwith the findingsofFrencheconomistThomasPiketty,namely,thatwealthbecomesincreasinglyconcentratedwhentherateofreturnoncapitalisconsistentlyhigherthaneconomicgrowth.Weobserveapeculiardisconnectbetweenthisphenomenonandpublicdiscussionandinterpreta-tion of its social and economic effects. Economic reports, editorial comment, corporate strategy,labourpolicy,legislativeresponse,etc.,assumethattechnologicalchangedoesnotalterfundamen-taleconomicrelationshipsandassumptions.• Ontheonehand,thediscussionofautomationisfocusedalmostentirelyonitsprobableef-

fectsonlabouremployment,whilethemicro-andmacro-distributiveeffectsofthisshiftinproductiverolesarebarelymentioned.

• Ontheotherhand,thediscussionofrisinginequalityisfocusedalmostentirelyonissuesofdistributivejustice;theshiftfromlabourtocapitalasanincomesourcesanditsactiveroleinconcentratingwealthisignored.

Thus in a labour-focused environment thedistributive effects of automation which are a primecauseofexpandingcapitalconcentrationhasbecomethe“elephantintheroom”–anenormouslyportentoussubjectwhichisalmostentirelyomittedfrompublicdiscussion.

Interestingly, this issuewas already raised on both sides of the iron curtain in the aftermath ofWorldWarII.StanisławLem,thePolishwriterandfuturistwhowasgreatlyinterestedincybernet-icsandrobotics,anticipatedtheseproblemsinPolandasearlyas1954.Shortlythereafter,in1958,theAmerican corporate lawyer andmerchantbankerLouisO.Kelso presented an analysis of thefundamentalcausesofthisphenomenonandaproposalfordealingwithitseconomiceffectsinhisbook“TheCapitalistManifesto”.Hissolutiontotheproblemwastobroadentheownershipofpro-ductive capital through democratizing access to capital credit, the key to acquiring productiveproperty, in otherwords the non-human things that producewealth in an industrial society. Toaccomplishthis,Kelsoinventedtheprototypeoftheleveragedbuy-outandappliedittodifferentconstituencies—Employee StockOwnership Plans (ESOPs) for corporate employees, ConsumerStock Ownership Plans(CSOPs) for consumers andGeneral Stock Ownership Plans (GSOPs) forcitizensingeneral.1

InJuneof2014,NeelieKroes,VicePresidentoftheEuropeanCommission,announcingthelaunchof theworld's largest civilian research and innovationprogramme in robotics, asserted: "Europeneedstobeaproducerandnotmerelyaconsumerofrobots“.Kelsowouldhaveaddedhisownpos-tulate,urgingfora“raceforthemachine”toenablecitizenstobecomeownersoftherobotswhichbothserveandreplacetheirlabour.Againstthisbackgroundandinlightofthedeclineofthewageshare, thispaper investigates fundamentalquestionsof ownership, automation, incomedistribu-tionandcapitalconcentration.1 Thethreeplansarevariationsofacapitalcreditdeviceforutilizingcorporatecredittosimultaneouslyfinance

bothcorporategrowthandassetacquisition.Theplanenablesemployees (or consumersor citizens respec-tively)tobuystockinacorporationandtopayforitoutofthatstock’sfutureearnings.Asof2014therewereabout10,000ESOPswithmorethan14.5millionemployeeparticipantsintheU.S.

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1.BackgroundIn anageof globalizationand technologicalprogress theaccelerationofdigital informationandcommunicationtechnologies(ICT)hasledandcontinuestoleadtosocialchangeswhichshakethefoundationsoftheworldofwork,dubbed“industrialrevolution4.0”.2Thisprocessmainlycharacterisedbyautomation,roboticsandartificial intelligence impactsnotonlyna-tionallawandeconomicsystemsbutalsotraditionalinstitutionsofsocialexistenceandsuchthefoundationsofourmodernsocietiesassuch,inEuropeaswellasacrosstheworld.InarecentdraftreportoftheCommitteeonLegalAffairsonCivilLawRulesonRobotics,trig-geredbythecurrentdiscussiononrobots,automationandartificialintelligence,theEuropeanParliamentraisesquestionsabout“thefutureofemploymentandtheviabilityofsocialsecuri-tysystems”aswellas“thepotentialforincreasedinequalityinthedistributionofwealthandinfluence”.3Property ownership is indeed the distributional mechanism of the freemarketwhichawardsincomefromproductiontotheproducersaccordingtotheirrespectiveproduc-tiveinputs:tolandowners,theearningsofland;toworkers,theearningsoflabour;tocapitalowners,theearningsofcapital.Overtimeproductivecapital–machines,structuresandsys-tems–hasassumedanevermoredominant role in the industrialproductionprocess.Asaresult,theownersoftheseproductiveassets–nowincludingrobots–receiveagrowingshareofmarket-sourced income,with an ever-smaller proportion going to the owners of humanlabourpower.Sincemoney spent on goods and services is what keeps an industrial society running, thesteadyerosionoflabourearningsisaproblemthatultimatelythreatensthewellbeingofusall.Butautomationisalreadyaffectingoursocialsecuritysystems.AccordingtoestimatesofIGMetall, one ofGermany’s largest tradeunions, the average cost of an industrialworkinghouris40Euros;ofthiscostaroundathirdiscontributedtosocialsecurity;thecostofaro-botworkinghourcomestoaroundsixEuros,includingthecostsofmaintenanceandrepair.Proposalstocompensateforthelostsocialsecuritycontributionsbyintroducinga“robot”or“machinetax”havebeenmadesincethe1970s.4Inthewakeofthefinancialcrisis,newques-tionshavearisenabout its repercussionson thewelfarestate,e.g.,whyhasmedian incomestoppedrisingandwhy,asaconsequence,haveoureconomiesandsocietiesseemedtohavegradually becomemore unequal? Onewidely discussed explanation is the thesis of FrencheconomistThomasPiketty,namelythatwealthbecomesincreasinglyconcentratedastherateofreturnoncapitalisconsistentlyhigherthaneconomicgrowth.5Inshort,ascapitalownersaccumulateevermoreproductiveassetstherebyincreasingtheircapitalincome,workersre-ceiveanever-shrinkingshareoflabourincome.

2.Threedecadesofdeclineofthelabourshare–Wherearewetoday? The shiftbetween factorsofproduction in favourof capital is exacerbatedby technologicalprogressand itsembodiment inautomation.The “raceagainst themachine” isnowback inthe headlines6, a competition perceived to threaten labourmarket equilibrium and – somepessimisticvoices7fear–thefutureoflabouremployment.ItappearsthatdigitalICThavealteredtheverynatureoftechnologicalchange;themostre-cent advances are incorporated inmachines anddeviceswhosemainpurpose is to replacehuman participation entirely thereby eliminating labour jobs.8Digital innovation is a phe-

2 See,e.g.,https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-

how-to-respond.3 DraftreportwithrecommendationstotheCommissiononCivilLawRulesonRobotics(2015/2103(INL)).4 MostrecentlyrelatedproposalswerediscussedintheFrench,BritishandGermanparliamentaccordingto

theGermanWeeklyDieZeit;see“AbzumFinanzamtKollege”,No31of21July2016.5 Piketty,T.,”Capitalinthe21stCentury”,2013.6 FinancialTimes,3Feb.2013,EdwardLuce,“Obamamustfacetheriseoftherobots“.7 Rifkin,J.„Theendofwork“,2ndedition,2004.8 Brynjolfsson,E./McAfee,A.“Raceagainstthemachine”2011.

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nomenon both broad and deep; its economic implications are profound.Many of these arepositive, i.e.,productivity increases,pricereductionsandagrowingeconomicpie.Thereareimportantdistributiveeffects,however,whichareunfavourable–aboveallwhoseskillscom-putershavemasteredandwhonowseeshiswagesandopportunitiesshrinking.Accordingtoestimatesfroma2013studybyOxfordeconomistsFreyandOsborne9,intheU.S.labourmar-ket47percentofemploymentcouldpotentiallybeautomatedinthenexttwodecades.Ifthisprocessweretocontinueunchecked,mostworkers,particularlythe leasteducatedwhoareunabletoadaptquickly,wouldfindthemselvesinacompetitionwithmachines,theirrelativepositionseverworse.

Indeed,recentacademicstudiesonthedeclineoflabour’sincomeshare(seefigure1)pointtotheroleofcapitalaccumulationandcapital-augmentingtechnicalchange(see,e.g.,Bentolilaand Saint-Paul, 2003;Arpaia,et al., 2009; Driver and Muñoz-Bugarin, 2010; Raurich,et al.,2012). In thepast threedecades, technologicalchangeembodied in ICTcapitalhasbeenbi-ased against theless educated10,with disembodied technical change biased towards high-skilledlabour.11However,unlikepastautomationthechangesthatICTbringalongaffectalsoworkerswithhighereducationandskills.12Moreover,theshiftofincomeawayfromlabour–and, inparticular, away from low-wageworkers– towards capital and topearnersappearstohaveanegativeimpactonaggregatedemand;workersreceivingbelow-averagepaytendtohaveahigherpropensitytoconsumethantopearnersandcapitalists.13

Figure1:Dynamicsofthewagesharebetween1976and2006(SourceOECD2007)

3.“Re-shoring”–bringingbackthejobs?Thisdevelopmenthasunanticipatedimplicationswithrespecttothe(re-)locationofproduc-tion sites in the context of globalization. Large international ICT companies, e.g., Apple,GE,

9 Frey,B./Osborne,M.„TheFutureofEmployment:HowSusceptibleAreJobstoComputerisation?”,2013.10 SeeIAB-Kurzbericht24/2015,p.6andEvans-Pritchard,Ambrose„Robotsmayshattertheglobaleconomic

orderwithinadecade“,theTelegraph5Nov.2015.11 SeeBassanini.A/Manfredi,T.“Capital'sGrabbingHand?ACross-Country/Cross-IndustryAnalysisofthe

DeclineoftheLabourShare”,2012.12 SeeFreeman,Richard,“Whoownstherobotsrulestheworld“,IZAWorldofLabor2015:5.13 Belke,A./Dreger,C./Ochmann,R.“Dowealthierhouseholdssavemore?“,DIWdiscussionpaper,2012.

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IBM,GeneralMotors,aremovingsomeoftheirproductionfacilitiesbacktotheUnitedStates.Patrioticsentimentsorpoliticalconsiderationsmayhavearole in thisdevelopment,but thefundamental drivers behinddecisions to "repatriate" jobs are economic. 14 First,the la-bourportionof the costofmanufacturing– inparticular in the ICTsector–hasbecomesosmallthatitisnolongerasignificantfactor.15Second,thecostoftransportoutweighsthere-mainingadvantagesoflow-pricedlabour,makingproductionincountrieswithhigherpricedlabourprofitableonceagain.Third,thecostsofrobotsare(almost) thesameeverywhere.16Such “re-shoring” is expectedtoboost employment, if at all, mainlyfor high-quality, well-educatedworkersnecessarytoinstallandmaintainmachinesandrobots.

However,itshouldbestressedthatsubstitutingmachineinputforlabourinputisnotdeliber-ately intended toeliminate jobs.Thepurpose is to reducecosts.Lessefficientmachinesarereplaced bymore efficient ones, production procedures are redesigned, and newmaterialsreplace older ones – all for the purpose of lowering the costs of production.The catch-phrase“manvs.machine”ismisleadinginthatitassumesthathumanlabourisstillthemainsourceofproductivepower.Thatisnolongertrue.Labourisacost.Manufactureisdrivenbythe need to reduce costs, in order to make products cheaper and more affordable, there-byincreasingsalesandprofits.Theconsequencesofthiscentralpurposeonthefreemarket,employment,purchasingpower, incomedistribution,etc.–aresecondaryeffectswhichhaveconsequencesoftheirown.Butitiswrongtoassumethattheseconsequencesareintended.Costisthetarget.

Europeisalsoacontestant intheraceforthemachine.InJuneof2014,theEuropeanCom-missionand180companiesandresearchorganisations (under theumbrellaofeuRobotics)launched theworld's largest civilian research and innovation programme in robotics.17Alt-hough the programme promises, “to create over 240,000 jobs in Europe, and increase Eu-rope’sshareoftheglobalmarketto42%,”italsostressesasoneofitsmaingoalstheenablingof“companiestocontinuemanufacturinginEurope,wheretheymightotherwisemoveopera-tionstolower-costcountries”.

4.TheelephantintheroomWhatdeserves further investigation is thepeculiardisconnectbetweenthephenomena justdescribed and public discussion and interpretation of their social and economic effects asmanifested in economic studies, government reports, journalists’ commentary, changes incorporatestrategy,labourpolicy,legislation,etc.• Ontheonehand,thediscussionofautomationisfocusedalmostentirelyonitsprobable

effectsonlabouremploymentwhilethemicro-andmacro-distributiveeffectsofthisshiftinproductiverolesarebarelymentioned.

• Ontheotherhand,thediscussionofrisinginequalityisfocusedalmostentirelyonissuesofdistributivejustice,;theshiftfromlabourtocapitalasan.incomesourcesanditsactiveroleinconcentratingwealthisignored.

Thus in a labour-focused environment thedistributive effects of automation which are aprimecauseofexpandingcapitalconcentrationisthe“elephantintheroom”–anenormouslyportentoussubjectalmostentirelyomittedfrompublicdiscussion.1814 “Outsourcingandoffshoring”,EconomistSpecialreport,January2013.15 „Welcomehome-Theoutsourcingofjobstofarawayplacesisonthewane.ButthiswillnotsolvetheWest’s

employmentwoes“,TheEconomist,19Jan.2013.16 RethinkRobotics’trainablelow-costrobot“Baxter“withalifetimeofthreeyears(65,000hours)alreadyto-

daycostsonly22,000USDbringingdownthecostofaworker’shourto3.4USD;seeCBS60Minutes“Arero-botshurtingjobgrowth?13Jan.2013at:http://www.cbsnews.com/video/watch/?id=50138922n.

17 EuropeanCommissionPressrelease(IP/14/619),Brussels,3June2014„EUlaunchesworld’slargestcivilianroboticsprogramme–240,000newjobsexpected”.

18 AnexceptionisRichardFreemanwhoarguesin“Whoownstherobotsrulestheworld“,IZAWorldofLabor2015:5that“[…]capitalisasubstantialcontributortoinequality[…]inlaborincomesbecausehighlypaid

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Thisomissionisevenmoreastoundingsincethe“elephant”isbynomeansanewormodernphenomenon:itgoesbacktothebeginningoftheIndustrialRevolution19,whichchangedtheproportionalrelationshipbetweentheinputfactorsinfavourofcapital.Whatstartsoutasaperceived risein labour productivity collapses in labour redundancy at the moment whenproductionisfullyautomated.Insteadoflabourincomeforthemanyitsincomeyieldendsupinthehandsofafew–asaneconomiceffectofconcentratedownershipoftheproductivecap-ital.20Atthesametime,theargumentthatcapitalconcentrationiseconomicallydysfunction-alisundisputed,asisthethesisthatdemocracyrequiresabroaddistributionofwealth.Socialattention so far, however, has been focused on the growing wealth of the few (e.g., anti-monopoly legislation)without acknowledging the corresponding increase in the number ofthosewhodonotown.Thecrucialpointhereisnottheantagonisticrelationbetweenlabourandcapital,butrathertheinteractionofthesefactors.Iftheownershipofthemachineswhicharereplacinglabourinproductionweremorewidelyspreadamongstthepopulation,workingpeoplecouldnotonlyreducetheireffectiveworkinghours,thusenhancingtheir“productivi-ty”whileincreasingtheirleisure,butatthesametimereplacetheirlostlabourincome.21

Thesameblindspotisfoundintheheateddiscussiononinequality:InGermany,beforethe2007meltdown,therichest20percentofthepopulationowned80percentofallcapitalas-setswhile50percentownedeithernoassetsatallorwereindebt.22Butincomeinequalitycontinued to grow throughout thecrisis.23The German philosopher Peter Sloterdijk com-plainedthat“agoodhalfofthepopulationofeverymodernnationismadeupofpeoplewithlittleornoincome,whoareexemptfromtaxesandlive,toalargeextent,offtheotherhalfofthepopulation,whichpaystaxes.”24Inhisview,theunproductiveincreasinglyliveattheex-penseof theproductive.Buthedoesnotaskwhyhalfof thepopulation iseconomicallyde-pendantoncharityfromtheotherhalfnordoesheshowanyinterestinthecauseofthisoc-currence.

5.“Creativedestruction”ofjobs–theinterimbalanceinindustrialsocieties2011Thedistributiveeffectsdiscussedabovewouldbelessdrastic,ofcourse,ifemploymentweredestroyedandcreatedatthesamerateandifthenewjobswerequalitativelythesameastheold ones.However,MacAfee andBrynjolfsson argue that this is not the case. Technologicalchangeinthe21stcenturyisbothfasterandmorewidespreadthaninthepastascomputersand ICT technology, unlike the steamengine, electricmotor or internal combustion engine,are subject to continuous improvement.25They provide evidence for divergences between

chiefexecutiveofficers(CEOs)andtopexecutivesarepaidstockoptions,restrictedstockgrants,andbonusestiedtocapitalincome”andthat“Ifweownedourreplacements,wewouldhaveourcurrentearningsandourtimefreedfromlabortospendaswewished[…]Ifotherpersonsownedourreplacementrobots,wewouldbejoblessandsearchingfornewworkatlowerpaywhiletheownersoftherobotswouldreapthepay/marginalproductfromthemachinesthattookourjobs”.

19 See, e.g., the „LeedsWoollenWorkers Petition“ of 1786 complaining about the effects ofmachines on thepreviouslywell-paidskilledworkers;http://www.fordham.edu/halsall/mod/1786machines.asp

20 AgoodexampleisgivenbyDavidRotmanin“HowTechnologyIsDestroyingJobs”,MITReviewofJune12,2013:“someonewhocreatesacomputerprogramtoautomatetaxpreparationmightearnmillionsorbillionsofdollarswhileeliminatingtheneedforcountlessaccountants.”

21 SeeRotman,D.,“WhoWillOwntheRobots”MITReviewJune16,2015.22 Frick,J./Grabka,M.“GestiegeneVermögensungleichheitinDeutschland”(increasingassetinequalityinGer-

many),DIWWochenberichtNr.4/2009.23 Rosemann, M. / Tiefensee, A. „Messung von Ausmaß, Intensität und Konzentration des Einkommens- und

Vermögensreichtums inDeutschland“,DIWSOEPpaper640,2014;Hellebrandt,T.etal. „Income InequalityDevelopments intheGreatRecession“,DIWSOEPpaper644,2014;Anselmann,C./Krämer,H., „Spitzenein-kommenundEinkommensungleichheitinDeutschland”WISOdirekt9/2012.

24 “DieRevolutiondergebendenHand”(RevolutionofthegivingHand),FAZ13June2009;thearticlekickedofalongcontroversyinGermanmedia,which,however,didnotaddresstheshiftbetweenlabourandcapital.

25 Such,e.g.,Moor´s law(1965)predicts thatcomputers’abilitiesasanextensionof theirprocessingabilities,woulddoubleevery12month,whereas today thepaceof increase incomputingcapacity isbelieved tobeevenfaster.SeeBrynjolfsson,E./McAfee,A.“Raceagainstthemachine”2011,pages17pp.

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higher-skilledandlower-skilledworkers,between“superstars”andaverageworkers,aswellasbetween capital and labour, aprocess that – as they say – is inclined to leavemore andmorepeoplebehindalthoughbenefitingtheeconomyasawhole.26AnotherscenariomitigatingthenegativedistributiveeffectsmentionedwouldbeaEUnon-growthpolicy.However,inregardtotherelationshipbetweenemploymentandproductivityitseemsunlikelythatapolicyofreindustrialization,currentlyontheEuropeanagenda,27willleavemuchroomfortheintentionalnon-utilizationofthepotentialforincreasingproductivi-tythatmodernICToffers.Onthecontrary,policymakerscanbeexpectedtoexploitthispo-tentialinordertoexitthegreatrecession.AcomparisonoftheannualgrowthratesintheUSand Europe (see table 1) well illus-trates this trade-off. While between1970 and 1990 growth in economicoutputwas similar, in theEUproduc-tivitygrowthmore thandoubledwithlow employment growth. This trendwasreversedbetween1990and2000when the US, while maintaining itsoutput rise, increased productivitywhile almost halving employmentgrowth. In other words productivityincreased at the cost of employmentandviceversa.Interestingly,botheco-nomic regions show a similar declineof the wage share over the past 30years(seeabovefigure1).

Butevenifjobcreationkeepspacewithjobdestruction,thedistributiveeffectsofautomationwillstillleadtoincreasingcapitalconcentration.Asillustratedinfigure2,labourproductivityasameasureofproductionoutputperhumanhourworkedhasbecomeuncoupledfromre-muneration in the past: Between 1973 and 2011, average hourly compensation (which in-cludesthatof topearnersaswellasunskilledworkers)grewjust39.2percent, laggingbe-hindproductivitygrowthof80.4percent in thesame interval,aphenomenoncalled“grossdecoupling”.Criticsargue,however,thatwhencalculatingthisrateintermsofnetdecoupling,theeffectdramaticallydecreasesorevendiminisheswhenincludingincreasednon-wagela-bour costs, e.g., pension contributions, healthcarebenefits andother factors.28They explainthedifferenceofgrossandnetdecouplingwithtwokeyfactors,namelyinequalityandnon-wage labour cost and acknowledge, nonetheless, that increasing wage inequality is an im-portantfactorcontributingtothephenomenonof“decoupling”.Itispredictablethatintomorrow’sworldproductivitywillstillberisingsharplybutthisin-creasewillbecomeincreasinglydisconnectedfromwagesandsalariesforthemany,whilethefewwillbenefitfromeversteeperincreasesinexecutiveremunerationandcapitalearnings.29AstechnologicalprogressembodiedinICTcapitalhasbeenbiasedagainstthelesseducatedandtheaverageworkerandonlyinsomecasestowardshigh-skilledlabour–asarguedearli-er–concomitantchangesintheemploymentstructurewillworsenthenegativedistributive26 SeeBrynjolfsson,E./McAfee,A.“Raceagainstthemachine”2011,pages10,39pp,46.27See,e.g.,CommissionCommunication“ForaEuropeanIndustrialRenaissance”COM2014(14)final.28 SeePessoa,J.P./VanReenen,J.,”Wagegrowthandproductivitygrowth:themythandrealityof‘decoupling”,

CentrePiece,Autumn2013.29 SeeJohnLanchesterintheLondonReviewofBooksVol.37No.5of5March2015“TheRobotsAreComing”

whoalsogivesan illustrativeexample for that trend: „In1960, themostprofitablecompany in theworld’sbiggest economywasGeneralMotors. In today’smoney, GMmade $7.6 billion that year. It also employed600,000people.Today’smostprofitable company [i.e.,Apple]employs92,600. Sowhere600,000workerswouldoncegenerate$7.6billioninprofit,now92,600generate$89.9billion,animprovementinprofitabilityperworkerof76.65times.”

Table 1: Employment vs. Productivity in the US and EU 11

Economic Region 1970-1990 1990-2000

United States Annual growth in %

Employment 2.1 1.3

Productivity 1.1 1.9

Output 3.2 3.2

Europe (EU 11)

Employment 0.4 0.6*

Productivity 2.4 1.5*

Output 2.8 2.1*

Note: Annual growth rates (in %); *)1991 – 2000. Source: Landmann (2004), p. 21

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effects.However,asthedigitalrevolutiongenerallyreduceslabourinputacrosstheboardinaneconomybasedongrowth,labourfallsascapital-basedincomesrise;consequentlywealthinequalitywillcontinuetoincrease.Figure 2:Growthofhourlyproductivity, realaveragehourlycompensation,andrealmedianhourlycompensation(overallandbygender),1973–2011(Source:Mishel,L.,EPIIssueBrief#330,2012)

6.Thepostulate:Araceforthemachine

Interestingly,thePolishwriterandfuturistStanisławLem,whotookagreatinterestincyber-neticsandrobotics,30anticipatedtheseproblemsinPolandasearlyas1954.31Fouryearslat-er,in1958,theAmericancorporatelawyerandmerchantbankerLouisO.Kelsopresentedananalysis of the fundamental causes of this phenomenon and a proposal for dealingwith itseconomiceffectsinhisbook“TheCapitalistManifesto”.32Heinventedanovelfinancialmech-anism,theprototypeoftheleveragedbuyout,tofinanceownershipofproductivepropertyforemployees, later to be known as theEmployee Stock Ownership Plan(ESOP). Kelso’sESOPusestheborrowingpoweroftheemployercompanytofinancethepurchaseofsharesinthatcompanybyitsemployees;theacquisitionloanisrepaidfromthefutureearningsofthecredit-financedshares.33

Therootoftheproblem,heargued,wasaccesstocapitalcreditinordertoacquireproductiveproperty,inotherwordsthenon-humanthingsthatproducewealthinanindustrialsociety.34Asolutiontothedilemmaofmachinessubstitutingforhumansandreducinglabourdemand30 ThewordrobotwascoinedbytheCzechinterwarwriterKarelČapekinhisplayR.U.R.(Rossum'sUniversal

Robots),published in1920.Literalmeaningof theword “robota” is “corvée”, “serf labor”, and figuratively,“drudgery”or“hardwork”inCzech;also(moregeneral)“work”,“labour”,inmanySlaviclanguages.

31 „Dzienniki gwiazdowe - Podróżdwudziesta czwarta IjonaTichego” (The StarDiaries -The24thVoyageofIjonTichy),ZbiórSezamiinneopowiadania,1954.

32 Kelso,L.O./Adler,M.,J. “TheCapitalistManifesto”,RandomHouse,NewYork,1958; furtherdevelopedandexplicatedinKelso,L.O./Hetter,P.“Two-FactorTheory:TheEconomicsofReality”,VintageBooks,RandomHouse,NewYork,1967.

33 AnESOPordinarilyinvolvesaloantoanemployeebenefittrust,whichacquirescompanystockandallocatesitthroughperiodiccontributionstoeachemployee'sESOPaccount.TheloanmaybeservicedbypaymentsbythecompanyfromcompanyprofitsorfromdividendspaidontheESOPstock.

34 ItisworthnotingherethatthePolishtradeunion“Solidarity“celebratedKelso’svisittoWarsawinOctober1989,and insisted on making employee ownership a part of the privatisation process.“Solidarity”tookaquitedifferentpositionfromthatofmostEuropeantradeunionsatthetime.

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wouldbe forEuropeancitizens toacquirea significant shareof co-ownership in the robotscompeting with them on the labour market, subsequently providing them with a secondsourceofincomeindependentoftheirlabour.35ThisisinlinewiththemostrecentsupportoftheEuropeanCommissionforEmployeeOwnership.36

WhileNeelieKroes,VicePresidentoftheEuropeanCommission,assertedthat"Europeneedstobeaproducerandnotmerelyaconsumerofrobots“,Kelsowouldhaveaddedhisownpostu-lateurginga “race for themachine” toenablecitizens tobecomeownersof therobotswhobothserveandreplacethem.

35 SeealsoFreeman,R.“Whoownstherobotsrulestheworld“,IZAWorldofLabor2015:5.36 EuropeanCommission,“StudyonthePromotionofEmployeeOwnershipandParticipation”,preparedforthe

EuropeanCommissionDGMARKTbyJ.Lowitzsch/I.Hashiet.al.,Brussels,188p.,2014.

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Annex:StanisławLemexcerptfromthe1954MemoirsofaSpaceTravelerFurtherReminiscencesofIjonTichy,The24thVoyage:

…“…Throughtheagesourinventorsbuiltmachinesthatsimplifiedwork,andwhereinancienttimesahundredDrudgelingshadbenttheirsweatingbacks,centurieslaterafewstoodbyamachine.Ourscientistsimprovedthemachines,andthepeoplerejoicedatthis,butsubse-quenteventsshowedhowcruellyprematurewasthatrejoicing.AcertainlearnedconstructorbuilttheNewMachines,devicessoexcellentthattheycouldworkquiteindependently,with-outsupervision.Andthatwasthebeginningofthecatastrophe.WhentheNewMachinesap-pearedinthefactories,hordesofDrudgelingslosttheirjobs;and,receivingnosalary,theyfacedstarvation...""Excuseme,Phool,"Iasked,"butwhatbecameoftheprofitsthefactoriesmade?""Theprofits,"hereplied,"wenttotherightfulowners,ofcourse.Now,then,asIwassaying,thethreatofannihilationhung…""Butwhatareyousaying,worthyPhool!"Icried."Allthathadtobedonewastomakethefac-toriescommonproperty,andtheNewMachineswouldhavebecomeablessingtoyou!"TheminuteIsaidthisthePhooltrembled,blinkedhisteneyesnervously,andcuppedhisearstoascertainwhetheranyofhiscompanionsmillingaboutthestairshadoverheardmyremark."BytheTenNosesofthePhoo,Iimploreyou,Ostranger,donotuttersuchvileheresy,whichattackstheveryfoundationofourfreedom!Oursupremelaw,theprincipleofCivicInitiative,statesthatnoonecanbecompelled,constrained,orevencoaxedtodowhathedoesnotwish.Who,then,woulddareexpropriatetheEminents'factories,itbeingtheirwilltoenjoyposses-sionofsame?Thatwouldbethemosthorribleviolationoflibertyimaginable.Now,then,tocontinue,theNewMachinesproducedanabundanceofextremelycheapgoodsandexcellentfood,buttheDrudgelingsboughtnothing,fortheyhadnotthewherewithal...""But,mydearPhool!"Icried."SurelyyoudonotclaimthattheDrudgelingsdidthisvoluntarily?Wherewasyourliberty,yourcivicfreedom?!""Ah,worthystranger,"sighedthePhool,"thelawswerestillobserved,buttheysayonlythatthecitizenisfreetodowhateverhewantswithhispropertyandmoney;theydonotsaywhereheistoobtainthem.NooneoppressedtheDrudgelings,nooneforcedthemtodoanything;theywerecompletelyfreeandcoulddowhattheypleased,yetinsteadofrejoicingatsuchfree-domtheydiedofflikeflies...…”…

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