The main form of direct government hiring has been middle-class administrative jobs; thus any continuation of the trend to automate and computerize such jobs would contract government employment too. A sufficiently resolute political regime could resist this by refusing to automate jobs away. This kind of neo-Luddite policy was tried by British unions and socialist politicians from the late 1940s through the 1970s. Staying technologically backward for the sake of protecting employment would probably be demoralizing and politically unviable; it was this atmosphere in Britain that led to the Thatcherite reaction. Another version that has worked in the past has been military Keynesianism, the buildup of employment in military forces along with stimulating the economy through military production. But the contemporary military has gone high tech, promoting transformation into smaller fighting forces coordinated by computers, satellites, aerial sensors, and remote control surveillance and targeting devices. The military is the leading edge of robotization, and it is doubtful that even a World War-style all-out mobilization would ever produce the kind of massive militaries seen in the 20th century.
Besides direct government employment, there is government spending, the favorite tool of today’s stimulus packages. Most of those invest in material infrastructure—roads, bridges, airports, energy, as well as the so-called information highway. But these areas too undergo computerization and automation, adding to the trend of technological displacement. Even less likely to stem the tide of job displacement is government investment in the private sector. Especially with the mantra to carry out such investments efficiently, government assumes the role of capitalist or at least capitalist overseer, all too willing to cut labor costs, and therefore to cut employment.
Another version of market intervention is regulation of the private marketplace, mandating a shorter work week, and protecting jobs from cuts. These policies have been widely practiced by Continental European states, but have not done much more than slow the drift to technological displacement. On the whole, such policies tend to protect existing jobholders, but to freeze out youth. That problem could be solved by government deliberately hiring youth in massive numbers; this has rarely been attempted (except in the military version), although in Escape #5 I will suggest that this has been done surreptitiously through inflating educational credentialing.
In principle, political policies could do anything whatsoever, constrained only by political will, which is to say mobilized political power and its vision as set by political cultures. Obviously political cultures have a long way to go from here if the state is going to do anything significant about technological displacement of the middle class. Mixed “liberal” government policies propping up the private economy can keep capitalism limping along quite a way into the future. But the mixed approach is not likely to solve the long-term problem of technological displacement, as long as private profitmaking drives the economy.
We need to think of the pressure, not merely in present-day (US) terms of 10% unemployment with small fluctuations of a few percentage points, but into the computerized future where the base unemployment rate could be three or five times higher. In other words, a situation of massive employment crisis, and governments elected to take action by the welfare state pathway. Obstacles to this are easy to envision, since they fill the political sphere at present. One is the antitax movement, likely to continue strongly among small businesses including struggling Internet entrepreneurs, as the Internet exposes them to heavy competition. These push against government acting to bolster employment, thus contributing to system crisis. On the other side is the demand from political constituencies—above all the unemployed and underemployed, who are now coming increasingly from the ranks of the educated and therefore highly mobilizable population.
Contending forces are in play. Which ones will win, and to what extent? Unrestricted free-market capitalism, left to itself, has no way of heading off such crisis. Its favorite reforms—reducing taxes and government regulation, encouraging capitalists to engage in still further expansion in any way they wish—all have the effect of pushing technological displacement, as well as generating other kinds of problems including financial manipulations and crises. The pro-welfare state forces in principle may have a solution to unemployment, but they run up against the budgetary problems of the state. A state which funds an expensive welfare state opens itself up to the pressure of financial markets, risking destruction of the purchasing power of its currency. Thus it would appear that a welfare state policy is caught in a damned-if-you-do, damned-if-you-don’t position. But let us see this in a long-term perspective, not just as an immediate stumbling block in everyday politics. A state caught in a deep structural dilemma is moving toward a revolutionary breakdown of the system. The fiscal crisis of the state is one of the main components of state breakdown; we need only add the other two components, a split between state elites over which solution to seek, and mobilization of a radical movement from outside. The split between state elites here just means a radicalization of the opposition between those who maintain their alliance to the financial markets, and those who are committed to using the state to alleviate unemployment and inequality. In the context of 10% unemployment and a limping post-recession economy, polarization between these positions is not strong. But if we extrapolate this to 50% unemployment, and the deep depression sure to accompany it, the chances for full-scale state breakdown will be strong. At this point, a revolutionary overturn of the property system will be the most obvious solution, including seizing control of the financial system so that it cannot destroy a government’s own currency. Not just particular features of capitalism, but its institutional underpinnings, would give way.
ESCAPE NUMBER 5: EDUCATIONAL CREDENTIAL INFLATION, AND OTHER HIDDEN KEYNESIANISM
Credential inflation is the rise in educational requirements for jobs as a rising proportion of the population attains more advanced degrees. The value of a given educational certificate or diploma declines as more people have one, thereby motivating them to stay in school longer. In the United States, high-school (i.e., twelve-year secondary school) diplomas were comparatively rare before World War II; now high-school degrees are so commonplace that their job value is worthless. University attendance is now over 60% of the youth cohort, and is on the way to the same fate as the high-school degree. It is a worldwide trend; in South Korea, 80% of high-school graduates now go on to higher education. The main thing that inflated degrees are worth is to plough them back into the educational market, seeking still higher degrees. This in principle is an endless process; it could very well reach the situation of the Chinese mandarin class during the later dynasties [Chaffee 1985], when students continued sitting for exams into their thirties and forties—only now this would affect the vast majority of the population instead of a small elite. Different countries have gone through educational inflation at different rates, but from the second half of the 20th century onward, all of them have followed this path [Brown and Bills 2011].
Educational degrees are a currency of social respectability, traded for access to jobs; like any currency, it inflates prices (or reduces purchasing power) when autonomously driven increases in monetary supply chase a limited stock of goods, in this case chasing an ever more contested pool of upper-middle-class jobs. Educational inflation builds on itself; from the point of view of the individual degree-seeker, the best response to its declining value is to get even more education. The more persons who hold advanced degrees, the more competition among them for jobs, and the higher the educational requirements that can be demanded by employers. This leads to renewed seeking of more education, more competition, and more credential inflation.