August 7, 2018

It’s a one-two punch. First, technology hollows out the jobs. Next, it hands a bullhorn to the disenfranchised and their would-be leaders. It’s a potent combination that is helping drive populism across the West.

The biggest shift of the late 20th century, a shift set to engulf the 21st, is from labour to capital as a factor of production. As with the first Industrial Revolution, the core issue is the reallocation of resources that will result from the application of new technology.

Second only to resisting invasion by a foreign power, full employment has long been the core concern of political leaders. It’s the key to public sentiment – and re-election. It’s a key reason why Trump made a big deal out of criticising offshoring, competition from China, and cheap immigrant labour – even if the bigger challenge to jobs is automation.

Trump claimed back in 2016: “The five percent figure is one of the biggest hoaxes in modern politics.” He was onto something
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Unemployment numbers have in fact been low in recent years. Yet something strange has been happening in the United States and, to a lesser extent, to other industrialised economies. Despite full employment, wages have been depressed. What’s more, plenty of people have ended up without jobs – and not even looking for jobs, which is why their absence from the workforce is hidden from the headline unemployment rate. As candidate Trump claimed back in 2016: “The five percent figure is one of the biggest hoaxes in modern politics.” He was onto something.

Male ‘workforce participation’ is the term economists use for men of prime working age who have jobs – and it has been steadily eroding for decades. Between 1954 and 2016 it dropped from 98% to 88%. In other words, a lot of people disappeared from the unemployment stats because they stopped searching for work. They decided to occupy themselves in other ways – by taking ‘early retirement’ on the golf course, caring for their grandchildren, playing video games, or falling into a spiral of addition. They became the ghosts of the unemployment statistics.

John Maynard Keynes, doyen of 20th-century economists, foresaw just this situation nearly a century back. With a somewhat ironic turn of phrase he spoke of the emergence of a “new leisured class”, as machines take jobs.

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Alongside the new jobless, we have many more people who do have jobs but whose standard of living has been increasingly depressed. The income stats are terrifying. According to Oxford economist Carl Frey and his colleagues, between 1979 and 2013 “the real wages of the vast majority of Americans … stagnated or even declined”. Productivity rose 64.9%, yet for 80% of the workforce wages went up by only 8.2%.

The shift in reward to the owners of capital has been immense. According to Frey, “A prime explanation is the robot revolution, which has contributed to both joblessness and wage reductions, especially among American men.” Specifically, “Diffusion of robots . . . has caused unemployment and wage reductions in particular among workers in blue collar jobs without a college degree.” Frey remarks that this “mirrors” the first four decades of the Industrial Revolution in the UK – when incomes stagnated or fell. “A large segment of the workforce has become detached from the engine of growth.”

What does this mean for an American working family? “The income distribution of 1979 would leave today’s top 1% with $1 trillion less in annual income and [add] $11,000 for a family in the bottom 80%.” These are astonishing numbers. It is unsurprising that with such a diminishing share of income going to workers there is a growing sense of political disenchantment – even radicalism. As Frey notes, from an economist’s point of view if workers don’t accept the “market reallocation” of their value, they will seek other kinds of redress.

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But what technology takes away, it also gives back. It is those same developments in digital technology driving automation that have granted the disaffected, and those who wish to play on their disaffection, the tools to hit back.

The disenchanted flyover voter – mid-life, male, lacking in education – does not need to be a social media activist, just a consumer. He can connect with like-minded people and access content to stoke his frustrations.

Enter Brad Parscale, head of digital for the Trump campaign. In a remarkably candid interview with the US television network CBS, Parscale laid out the Trump strategy to capture the hearts and minds of the disaffected voters in key states.

Donald Trump’s mastery of Twitter enabled a torrent of rabble-rousing tweets to be delivered directly to his followers
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Apparently, Facebook offers political campaigns specialists who are “embedded” in the campaign and help drive it. Parscale claims he was able to ensure all the Facebook people embedded with him were actual Trump loyalists, though Facebook denies that campaigns had a choice in whom to accept. Either way, the Trump campaign signed on to the highly sophisticated marketing game. They tested 50-60,000 messages a day, up to 100,000 some days. The goal? As Parscale puts it, to reach “15 people in the Florida Panhandle” – micro-targeting voters based on their concerns.

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And on top of this Facebook targeting, Donald Trump’s mastery of Twitter enabled a torrent of rabble-rousing tweets to be delivered directly to his followers, further stirring up discontent. And we now know that Russia has been aggravating the situation – both through ads from spurious organisations, and groups led by fake individuals. The goal has been to induce division by playing on the fears, legitimate and otherwise, of disaffected flyover Americans – and it is working.

Emerging digital technologies are pouring fuel on the flames of disaffection felt by flyover communities – both through their impact on labour markets, undercutting jobs and holding wages down, and in enabling those feeling aggrieved to find like-minded individuals and access content that reinforces their sense of disenfranchisement. Mitigating the impact of the Fourth Industrial Revolution on its losers must surely be a priority.

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