Rage Against The Machines

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The current hot button issue lately has been the “Great Wealth Divide.”  Pundits across the world have given their two cents about how to fix the ever growing wealth divide.  Ideas range from tax reform to tax increases; giving more power to the workers or further encouraging the rights of corporations; education reform in low income areas and making community college free.  The big bright headline of “in the next year the top 1% of the world’s population will control over 50% of global wealth” has sent the globe, and the mouth breathing media, into a complete and total frenzy.  Yet with all the hot air being spewed from the mouths of Democrats, Republicans, Communists, Libertarians, MSNBC, Fox News, and just about every other dope with access to a microphone and camera I still have yet to hear a single person address the actual reason behind this ever growing wealth divide.  The reason for the ever growing wealth divide is quite simple but we, in our Politically Correct Society, are too cowardly to actually mention the true reason for the wealth divide in polite company.

Here is the reason.  Global population is increasing at an exponential rate.  Advances in technology are also growing at an exponential rate.  Therefore the world needs LESS people to do the same amount of work (advances in technology) but the world is home to MORE people than ever before in humanity.  Very simply, technology means we need less people to accomplish the same tasks.  But we have more people.  There is the absolute basis for the growing wealth divide.  Less people are needed to do the same amount of work, therefore more and more people are being left behind because of advances in technology.  Now, if you’d like to indulge me further, I shall explain.

Let us look specifically at the United States of America.  Again, the US has near record levels of wealth inequality.

united-states-population

In 1945, the year WWII ended, America had a population of 139.9 million people.  In just 70 years, population has more than doubled in America.  Currently our population is roughly 330 million people.  Ah, but you say, America’s GDP has absolutely exploded.  In 1960 our GDP was about $520.5 Billion; today our GDG is now $16.8 Trillion.  So there is more than enough money to go around for everyone right?  Wrong.  Absolutely wrong.  This is where TECHNOLOGY comes in to play.

united-states-gdp

Technology has killed much of the demand for “middle class workers.”  Let’s look at several examples but we will start first with perhaps the most iconic “middle class American job;” the manufacturing job.

Auto Manufacturing

The left hand picture is from the engine assembly line of the Ford Motor Company when they were producing the Model T.  Henry Ford famously stated that he “paid his workers a healthy wage so they could buy the products they produced.”  Now look at the right hand picture from a modern automobile assembly line.  Notice anything missing?  People.  People are missing from those pictures.  Why hire a human when you can use a robot?  Humans are inefficient.  They get tired, they make mistakes, they get sick, they take breaks, they go on strike, they demand things like health benefits, food, OSHA standard work conditions, etc.  What do robots demand?  A computer code and an electrical socket.  Robots are an example of technology that has killed the American manufacturing job.

Now, lets quickly move through several more examples.  Both of my Grandmothers worked in a clerical capacity for large companies.  They earned a very nice living wage.  Guess how many companies now have a typing pool?  None.  The concept of having a secretary for almost all employees of importance is gone.  Book keepers, record keepers, typists, letter writers, etc are all gone.  Why?  Microsoft Office.  People can write their own documents, keep their own books, create their own presentations, and mail (sorry….its now E-mail) their own correspondence.  Nope, don’t need those middle class jobs anymore either.  We have technology now thank you very much.

The list of middle class jobs that used to be done by humans but can now be done much more efficiently by technology could go on for paragraphs and paragraphs.  But the point has been made.  So we now must move to the true heart of wealth inequality; the fact that the average person is now nothing more than an interchangeable commodity.  Sorry “Participant Trophy” crowd; the true fact is that a vast majority of people are simply average.  They just exist without bringing much to the table in the form of economic worth or new and revolutionary ideas.  Not many people truly “Add Value.”  Yes, that is brutal.  However, it is also true.

Simply, those that harness the power of technology via the NEXT GREAT IDEA are the ones that get rich.  Then they hire the faceless masses to implement the idea.  But there is minimal value in the average worker; they are either a) interchangeable or b) replaceable via a machine.  Bottom line: there will always be a need for great ideas, world class skill, and those that value ADD.  These are the people that will collect an ever growing amount of wealth because, again, they need less and less people to implement their ideas.  And as the total population grows, this means that an even smaller percent of the population will be involved in a high paying job.

Take for example a computer programmer.  The ability to write code is now a commodity.  The average high school kid can probably fire off a few lines of C++ or Java.  That average coder gets paid perhaps slightly above minimum wage to do what they do.  But what about a VALUE ADD programmer; someone who is brilliant with code and has a great idea?  Well, they turn into a Mark Zuckerberg.

Let’s put this into even greater perspective.  Facebook absolutely exploded onto the scene and achieved amazing success (love them or hate them; they are successful).  Guess how many people Facebook employs?  6,337.  That’s it.  A $160 Billion company employs six thousand people.  http://www.forbes.com/companies/facebook/  Again, great big ideas that require incredible talent to bring to fruition only need a small amount of employees.  Of course these employees are incredibly well paid.

But what about a very low skilled job providing a commodity service.  Yes, I’m looking at you SERVICE sector.  As in the sector that has added the most amount of net jobs in our economic “recovery.”  Let’s look at the most famous service sector company: McDonald’s.  McDonalds is worth $97 Billion; roughly two thirds of Facebook.  Guess how many people they employ?  444,000 people.  http://www.forbes.com/companies/mcdonalds/  They employ 69 times more people than Facebook.  Doesn’t take much talent to be a serviceable burger flipper but McDonalds sure needs a bunch of them; 100 Billion Burgers Served.  And, because there is no talent in adding pickles to a patty, they are minimum wage workers.

Which is of course why there is such a pissing match now about minimum wage.  Obviously there is a great demand for minimum wage to increase!  The person that used to get a living wage working on an assembly line at Ford in a “middle class job” is now flipping burgers.  The person that used to be able to make ends meet as a secretary is now pouring coffee at Starbucks.  Why?  They are no longer needed; TECHNOLOGY has replaced them.

So if you want to understand the wealth divide, simply understand that technology is DECREASING the need for the average human worker while the population continues to INCREASE.  What else would you expect to happen?

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