Alienated, Alone And Angry: What The Digital Revolution Really Did To Us

We were promised community, civics, and convenience. Instead, we found ourselves dislocated, distrustful, and disengaged.

Joseph Bernstein

BuzzFeed News Reporter

Posted on December 17, 2019

In April 1997, Wired magazine published a feature with the grand and regrettable title “Birth of a Digital Nation.” It was a good time to make sweeping, sunny pronouncements about the future of the United States and technology. The US stood alone astride the globe. Its stock market was booming. Microsoft was about to become the world’s most valuable company, a first for a tech firm. A computer built by IBM was about to beat the world chess champion at his own game.

And yet, the journalist Jon Katz argued, the country was on the verge of something even greater than prosperity and progress — something that would change the course of world history. Led by the Digital Nation, “a new social class” of “young, educated, affluent” urbanites whose “business, social and cultural lives increasingly revolve around” the internet, a revolution was at hand, which would produce unprecedented levels of civic engagement and freedom.

The tools of this revolution were facts, with which the Digital Nation was obsessed, and with which they would destroy — or at least neuter — partisan politics, which were boring and suspicious.

“I saw … the formation of a new postpolitical philosophy,” Katz wrote. “This nascent ideology, fuzzy and difficult to define, suggests a blend of some of the best values rescued from the tired old dogmas — the humanism of liberalism, the economic opportunity of conservatism, plus a strong sense of personal responsibility and a passion for freedom.”

Comparing the coming changes to the Enlightenment, Katz lauded an “interactivity” that “could bring a new kind of community, new ways of holding political conversations” — “a media and political culture in which people could amass factual material, voice their perspectives, confront other points of view, and discuss issues in a rational way.” Such a sensible, iterative American public life contained, Katz wrote, “the … tantalizing … possibility that technology could fuse with politics to create a more civil society.”

Such arguments, that a rational tech vanguard would spark an emancipatory cycle of national participation, were common at the time. (Though they were not unchallenged.) Katz’s is notable for its relative restraint. “The Long Boom,” an infamous piece published in Wired just three months later, predicted the spread of digital networks “to every corner of the planet” leading to “the great cross-fertilization of ideas, the ongoing, never-ending planetary conversation” that would culminate, by 2020, in “a civilization of civilizations” that would set foot on Mars in species-wide harmony. (Instead, we got Baby Yoda.)

This evangelism had a profound influence on the next 20 years of laissez-faire policy toward and positive public opinion about the digitization of American life. A deeply felt, mostly unexamined, sense that tech would lead to a freer and more convenient existence was the midwife of our digital present. It allowed the creator of a website to rate the attractiveness of Harvard’s women students to build an advertising platform with $55 billion in annual revenue. It allowed an online shop created to sell books to build a $25.7 billion cloud computing network. It allowed a company that started as a way for rich people to summon private drivers to turn itself into $47 billion, well, whatever the hell Uber is.

It hadn’t tamed politics. It sent them berserk.

Though challenged at the edges, this sense lingered. As late as 2012, even as the vast platforms that now control the internet had assumed their current shapes, the bestselling author Steven Johnson argued the glass was half full in his book Future Perfect — that “peer progressives,” enlightened digital natives, would end entrenched social and political problems through crowdsourcing.

Looking back from the shaky edge of a new decade, it’s clear that the past 10 years saw many Americans snap out of this dream, shaken awake by a brutal series of shocks and dislocations from the very changes that were supposed to “create a civilization of the Mind in Cyberspace.” When they opened their eyes, they did indeed see that the Digital Nation had been born. Only it hadn’t set them free. They were being ruled by it. It hadn’t tamed politics. It sent them berserk.

And it hadn’t brought people closer together.

It had alienated them.

The longest-running measure of alienation in American life is the Harris Poll’s Alienation Index, which has been calculated annually for more than 50 years. It’s a simple survey that asks whether respondents agree with these five statements:

What you think doesn’t count very much anymore.

The rich get richer and the poor get poorer.

Most people with power try to take advantage of people like yourself.

The people running the country don’t really care what happens to you.

You’re left out of things going on around you.

Harris then averages the rates of agreement to reach an index, which is a rough proxy for how included Americans feel in their country and their communities. In 1998, a year after the “Birth of a Digital Nation,” was published, the score was 56%. In 2008, as the platforms became dominant, it was 58%. Last year, it was 69%, the highest it’s ever been. (The lowest level, 29%, came in the Alienation Index’s first year, 1966, the same year HP began selling the 2116A — its first computer.) It’s easy to speculate about the reasons for this increase: a financial crisis that awakened Americans to the widening gaps between rich and poor; an opioid epidemic caused by corporate greed; entrenched racism and sexism; bitterly divided partisan politics; and, of course, technological change — the prism through which Americans view all of these things, and the vector that brings Americans’ feelings about all of these things together into the same few spaces.

I’ve spent six years reporting on deeply alienated people on the internet, during which time I’ve come to see conditions of disconnection and frustration everywhere the Digital Nation touches: on social media, in search algorithms, in the digital economy. In myself. The feelings of powerlessness, estrangement, loneliness, and anger created or exacerbated by the information age are so general it can be easy to think they are just a state of nature, like an ache that persists until you forget it’s there. But then sometimes it suddenly gets much worse.

There is no legal recourse — only participation in a public system that abuses its users.

Much worse: The Americans who marked this decade most visibly with their anger and impotence are, of course, young white men. In the summer of 2014, I first reported on the jilted 24-year-old who started an unlikely social movement with a seething blog post about the behavior of his ex-girlfriend, an obscure game developer. Gamergate! It was so stupid and about nothing and quickly became so scary and about everything. An entire culture of alienated posters and clever scammers cohered around it, around the impulse that something needed to be protected and some people needed to be attacked. What you think doesn’t count very much anymore. Some of these young men were trolls, others neo-Nazis. Some got TV shows. Some got paid out by billionaires. Some made it to the White House. Many wanted media careers. A few stewed for so long in their own resentment and the deeply sad world they created that they broke with reality. Several killed. One committed one of the most horrifying crimes of the 2010s.

Many more made threats, one of the defining features of life online in the 2010s. All things considered, we barely heard from the people who received them — a failure I was a part of. Try to imagine every woman and every nonwhite, non-Christian and LGBTQ human who has been threatened with death, torture, rape, or worse, on a major social platform. Add up all of those feelings of anger and powerlessness, against the backdrop of a $24 billion company that wouldn’t take it seriously for the longest time. There is no legal recourse — only participation in a public system that abuses its users. What you think doesn’t count very much anymore. People say: “Ignore it. No one dies from internet harassment.” Or else: “I’m so sorry for what you’re going through,” like it’s a divorce or a death in the family. Both are alienating, and I write from experience. Sometimes, for reporting, I received messages over Twitter and Facebook containing images of my father, who is dead, superimposed in a gas chamber. The joke is that he was Jewish.

The truth is we don’t have the right language yet to talk about an entirely new constellation of alarming and negative interactions, from threats to dogpiles to friend requests that go unanswered for a bit too long to yes, sorry, cancellations. They’re both more and less serious than we can manage to express with words, and the gap between that and what they feel like is an alienation.

What is an information Superfund site?

Experts might call the pictures of my father pollution in my information ecosystem. This is the best metaphor available as of 2019 for media that is bad for us. What, then, is a pristine information ecosystem? What is an information Superfund site? How do you do toxic information cleanup on, say, a town that has been poisoned by the internet? For that matter, how do we even agree on what’s toxic? Every attempt to name the problem with bad information on the internet runs into the “fake news” dilemma: Anyone can use this metaphor at scale, including and especially people who have a vested interest in keeping things extremely toxic. The sense that shared language is impossible: an alienation.

Even when we get “good” information online, we can’t always be sure where it’s coming from and why we’re seeing it when we’re seeing it. A profit-driven information apparatus uses a huge and growing fake user base to juice the statistics it shows to advertisers. The incentive is not to show you true things, but to be able to claim as many people as possible are seeing something, anything. To be no different to the men with the money than a bot, that’s an alienation. To not know where the things you read and see come from, nor that they’re real, that’s an alienation. To labor to pick out true from false, and know that many Americans don’t bother to do the same, that’s an alienation.

There are people who thrive in this world, of course: certain kinds of strivers, grifters, presidents. People who are very tendentious and very persistent. I reported a story this year about two young scammers who’d spent their whole lives online, honing their skills. They fabricated an entire world on social media with nothing more than time and used it to lead a young woman to her death. Were they the exception or the example? I couldn’t tell. Seeing people like this get their way over, and over, and over: That’s an alienation.

The big social media platforms are trying very hard to address the problem of toxic information, they tell us. But the algorithms that they tweak — I personally always imagine an old Swiss watchmaker squinting through a loupe — are top secret stuff. Secret corporate formulas encourage conspiratorial thinking. You’re left out of things going on around you.

Creators, who depend on these algorithms for money, are thus alienated, as are the people who consume their creations, which are frequently conspiratorial. And the creators are the (relatively) privileged ones! Each major social network is a brutal hierarchy. The people who ascend tend to be teeth-grindingly obsessed with what works and what doesn’t. The people who don’t suspect the risen have achieved their status through a series of inauthentic poses. Or they feel grossly inadequate. Either response is alienating. What you think doesn’t count very much anymore.

To be alienated from one’s labor — that rings a bell!

These dynamics play out in a desperate theater of social media optimization that my colleague Anne Helen Peterson so memorably described in her viral story about millennial burnout. It’s almost always unpaid work, the product of which doesn’t belong to the person who makes it. To be alienated from one’s labor — that rings a bell!

Which brings us to the new economy of freelancers and gig workers, precarious, unprotected, and connected. Hourly workers fry their brains with images no one should ever see — information detoxification — working to meet bizarre and inconsistent standards handed down from a distant authority, and then melt down in filthy bathrooms. Harried subcontracted delivery drivers feel so desperate to meet overnight shipping deadlines they get in deadly crashes. Uber drivers, some of whom sleep in parking lots, have separate bathrooms than Uber corporate staff. These people, it stands to reason, might be alienated. The rich get richer and the poor get poorer.

Meanwhile, the median home price is San Francisco is $1.4 million. This is where the Digital Nation mostly lives, in the most beautiful place in the country, profiting directly or indirectly off our participation in the alienating world they’ve built. Many of these people don’t want their children using the products and networks they build and sell. The people running the country don’t really care what happens to you.

Still, they’ll listen to you and spy on you for law enforcement. They’ll use that data, which they may or may not protect, to get richer. They’ll build special privacy schemes for themselves. Most people with power try to take advantage of people like yourself. Disempowered and unsure how to express it, you may take a strange comfort in the fact that there is another alienated human on the other end of your device. You’ll never meet them, but at least they will hear you.

Near the end of “Birth of a Digital Nation,” Jon Katz acknowledged that the new digital elite would have one natural division from the country they were bound to inherit: class.

“The digital world is often disconnected from many of the world’s problems by virtue of its members’ affluence and social standing.”

Membership in the digital nation as it exists today is a kind of class identity, of course. As Katz rightly predicted, its members’ “business, social and cultural lives increasingly revolve around” the internet. The luckiest of this group, high on meritocratic myths, have founded or found lucrative jobs with a handful of tech firms. The rest of us enrich them by using their platforms and their services. This is surely not the kind of participation Katz had in mind.

To his credit, Katz understood the harms that lead to alienation. “Alienation online — and perhaps offline as well — is not ingrained,” he wrote. “It comes from a reflexive assumption that powerful political and media institutions don’t care, won’t listen, and will not respond.” He just couldn’t conceive of a digital world that made them worse.

It seizes some of the best, noblest human instincts and harnesses them to a degrading system of profit. 

Here is the most alienating fact about the Digital Nation we live in: It incentivizes forms of engagement that make Americans feel less empowered and more alone than ever, to the benefit of very few. It seizes some of the best, noblest human instincts — to share, to know, to connect, to belong — and harnesses them to a degrading system of profit. Anesthetization to these conditions is dangerous. Cynicism and powerlessness are the hallmarks of another form of digital life, an authoritarian one Americans should badly want to avoid.

I wonder, as the US stumbles into a new decade, what kind of groups and communities we’ll form to deal with these feelings of alienation. Alienated people are especially vulnerable to the destructive forms of belonging promised by nationalism and racism. We know where those lead. Among those who can afford it, people may simply pay their way into less alienating online experiences. One thing that gives me a small amount of hope is the recent wave of tech worker organizing. Whatever becomes of it, it’s heartening to witness a group of people who are part of this alienating system attempt to build a movement around solidarity and direct action.

Or maybe we’ll relearn, as the writer and artist Jenny Odell suggests, to do nothing, its own form of action. That’s an American tradition, too. 

AI and the “Retail Apocalypse”: Online Shopping, and Stores Without Human Employees

David Barnhizer and Daniel Barnhizer  Thousands Of Major Retail Stores Close Despite Strong Economy”, CNNWire, 9/30/19.

The retail apocalypse over the past several years has devastated America’s department stores, chains and mom-and-pops. Stores are closing at record levels. The number of people working in retail is on the decline.  And all of that happened at a time when the economy was strong.  But if the United States slips into a recession, as many economists fear it will sometime next year, the problems plaguing retail could get far worse. Store closings could accelerate and layoffs in the sector — a major provider of American jobs — could spread.  Brick-and-mortar retailers are already in recession,” said Mark Zandi, chief economist for Moody’s Analytics. “They’ve been laying off workers coming up on three years. And this is a time when consumers are out spending aggressively. If the broader economy is in recession, there is going to be blood in the streets.”  

Our message in The Artificial Intelligence Contagion: Can Democracies Withstand the Imminent Transformation of Work, Wealth and the Social Order? is much more a social and philosophical warning than classic economic analysis.  This does not mean that we ignore the realities of business and economic decision making, and we each have experience in the private sector, but in Contagion and in this blog we are focused on the critical function of human work in democratic systems of the kind we think of when dealing with the American ideal.  This includes the critical importance of preserving, protecting and developing human jobs in contrast to AI/robotic work forces.  The reason, in our view, is the deep conviction that the multifaceted opportunities, growth potential, discipline, collaboration and challenges that are part of human work are vital parts of sustaining the democratic system itself.

Generalized economic statistics that highlight overall productivity and job loss due to consolidation of production, service and sales activity do not capture the impact of the rapid and large scale shut downs of retail stores in the face of AI and Internet-enabled online shopping.  How does a person deal with projections that 12,000,000 or 5,000,000 or even 800 million jobs will be lost in the next 10 to 15 years due to AI/robotics?  The answer is we don’t.  We simply can’t get our minds around a problem of that scope even if it is only a possibility or probability rather than a certainty.  

For this reason we will be looking at trends within industries and areas of work in an effort to make the situation sufficiently concrete that we can start talking about specifics.  Looking at what is being described as the “Retail Apocalypse” is one way to achieve that in a specific context.  As the analysis below indicates, the retail sector is among the top three areas of work employment in the US, with 15.8 million workers. 

[R]etail is one of the biggest sources of employment in the US economy, with 15.8 million jobs, or more than 10% of all jobs nationwide. The only areas to employ more people are health care and all the levels of federal, state and local government.  It employs so many people in every community,” Zandi said. “If consumers pull back and store closings mount, no other sector of the economy will be able to pick up that slack.” Retail job losses mount, women impacted more than men”, Krystal Hu, 3/8/19.

We are already experiencing rapid and dramatic changes in the retail industry that are resulting in significant job loss and store closings in the tens of thousands just in the past three years.  Andrew Challenger, Vice President of Challenger, Gray & Christmas, has described what he sees as the devastating impact e-commerce is having on jobs in physical stores.

Challenger … sees the layoffs as a continued shift from brick-and-mortar retail to e-commerce. The lag in total retail growth makes the changing retail landscape a zero-sum game — e-commerce grows at the cost of the traditional retail industry. UBS estimates for each 1% increase in e-commerce penetration, an additional 9,000 stores would need to close. And as fast-growing as the e-commerce industry is, research by The Conference Board finds that the growth in e-commerce jobs is not sufficient to make up for jobs lost in brick and mortar.  Retail job losses mount, women impacted more than men”, Krystal Hu, 3/8/19.

An early November 2019 report indicates how challenging is the accelerating collapse off retail stores, malls and associated jobs.  See, e.g., “50 haunting photos of abandoned shopping malls across America”, Mary Hanbury, 11/8/19.  There were 7,000 store closings in 2017 and another 5,524 in 2018.  The lower 2018 figure relative to 2017 led some to believe the worst had passed, but as Hanbury indicates, with two months to go in 2019 there had already been 8600 closings.  Less than three weeks later on November 26, 2019 another report indicated the store closings had grown to 9300 stores, raising the total to 21,824 in less than three years.  

Moody’s Zandi said credit is likely to get tighter, both for retailers and for consumers.  “A lot of retailers are hanging on because the broader economic environment is strong, interest rates are low, credit is available,” Zandi said. “No sector is more dependent on credit. If a recession comes, credit will get cut off both to the consumers and the retailers. That is going to mean a rash of bankruptcies and a lot of lost jobs.”  Thousands of Retail Stores Close, CNNWire, 9/30/19.

We recently engaged in an interaction with an individual who praised Amazon’s job creation record.  While it is true that Amazon employs over five hundred thousand people we need to understand that, like Walmart, this employment is not “on top of” preexisting jobs performed by workers in other companies offering the kinds of products Amazon sells, but replaces or destroys existing work and stores and creates an economy of scale we have not previously encountered.  The reality is that even though Jeff Bezos brags about the number of jobs Amazon is creating, we agree with Linda Fickensher when she writes that Amazon is destroying more American jobs than the Chinese. Part of her analysis explains this point.

Amazon played a large role in eliminating more than 50,000 jobs in recent years from just three companies — Staples, Office Depot and Best Buy, public filings show.  In March, MarketWatch estimated that Amazon will destroy 1.5 million retail jobs in the next five years. And with its push into self-driving trucks, drone delivery, automated grocery stores and more, the site said the total number of lost jobs would likely be more than 2 million, concluding, “Could Amazon actually kill more American jobs than China did? It’s quite likely.” “Amazon is great for consumers — but is it great for America?, ”Lisa Fickensher, 4/25/17. 

The “apocalypse” has already begun.  A wide variety of store types make up the closings.  For 2019 they include but are not limited to the following stores.   Payless closed all its 2500 stores, Gymboree 800, Dress Barn 650, Fred’s 557, Charlotte Russe 512, Family Dollar 390, Tesla closed all its physical dealerships and moved sales online, Chico’s 250 planned, HH Gregg 220, Macy’s laid off 5,000 workers in 2018, Radio Shack shut 1,000 stores with only 70 stores remaining open, The Limited closed 250 stores in 2017 with 4,000 jobs lost, Sears 175, /KMart 160, The Kitchen Collection 160, A.C. Moore 145, Walgreens 200, Gamestop 200, Charming Charlie 261, Gap 230, Shopko 363, Avenue 222, JC Penney 138, LifeWay 170, Footlocker 165, Destination Maternity 250, Victoria’s Secret 53, Abercrombie & Fitch 69, CVS 68, Olympia Sports 76, Bed, Bath & Beyond 60, Pier 1 57, Party City 55, Office Depot and Office Max 50.  

Krystal Hu writes about the impact of store closings, particularly the fact that women appear to be more vulnerable to job loss than men.  She explains:

It’s not easy to keep a job as a retail worker, especially in the first two months of 2019. Retail store closures have been announced one after another, resulting in job losses.  In January and February there were 41,201 job cut announcements in the retail industry, 92% higher than the same period last year and the highest level since 2009, a report from placement firm Challenger, Gray & Christmas shows.  The layoffs are mainly a result of store closures. Retailers from Payless to Gap plan to shutter hundreds of stores. At Payless alone, 16,000 store associates will be let go due to the shutdown of all its remaining 2,589 stores. This week, Dollar Tree said it will close 390 Family Dollar stores, without specifying how many employees will be affected. Retail job losses mount, women impacted more than men”, Krystal Hu, 3/8/19.

The US is not alone.  UK retail stores are experiencing similar problems.  A 2019 report indicated that 85,000 UK retail sector jobs were cut in just the past year as a consequence of economic uncertainty and the inability to match the prices of online retailers such as Amazon.  One reason for this is that physical stores are subjected to significant added costs and levies that online retailers do not bear.  Sarah Butler explains: 

The likes of Amazon have an unfair advantage because they have a lower business rate bill, which holds down costs and enables online retailers to woo shoppers with low prices. Business rates are taxes, based on the value of commercial property, that are imposed on traditional retailers with physical stores.”  Retailers cut 85,000 jobs in past year: Online shopping and Brexit uncertainty blamed for closures including Bonmarché”, Sarah Butler, 10/23/19.  In an ominous warning Butler adds: “The BRC predicted in 2016 that the number of people employed in retail – about 3 million – would fall by 900,000 by 2025 and that many would find it difficult to transition to new roles.”

The uncertainty that Butler cites is a key factor dictating the behavior of the owners of physical “bricks and mortar” stores.  A central consideration is the degree to which many retail stores and consumers are carrying large amounts of debt that is presently at very low interest rates.  Their concern is that if the US or UK economies go into a recession it will result in lower business revenues for stores, more job losses, higher refinancing rates, and tougher lender standards for rollover loans needed for refinancing.  This would have a highly negative effect on an economy that is doing reasonably well at this point but is nonetheless more fragile than many understand and subject to a significant downturn if its economic “fundamentals” change.  

Those fundamentals are not simply internal to the businesses themselves.  They include the ability of consumers to spend at the levels required to sustain their operations and satisfy investors.  They also relate to the degree to which e-commerce and online shopping increasingly become the preferred buying options for customers who formerly shopped at physical locations.   These factors involve unknowns and coalesce into a state of uncertainty that leads to apprehension that then generates a kind of “hunkering down” mentality among businesses and consumers that advances the very thing feared. 

It is reported that the expectation of two-thirds of corporate Chief Financial Officers (CFOs) is that the US will enter economic recession by the end of 2020.  Whether that actually occurs the apprehension that it could, or even might, become the reality inevitably affects the mindsets of people responsible for the economic decisions whether in private businesses or as consumers trying to figure out what they can afford to spend.  This injects what psychologists call “self-fulfilling prophecies” into the decision making equation by consumers and businesses.  

The following analysis suggests the difficulty of making decisions in the face of what “might” or “could” occur.  The hard reality people face who are responsible for making the decisions that involve the potential for success or serious degrees of failure is that they have to “hedge their bets” by taking risk into account.  This means that even if there is only a fifty percent chance of a serious downturn they need to include this in their decision making and this leads to cautionary approaches that collectively can help create the very conditions they fear.  Thousands Of Major Retail Stores Close Despite Strong Economy”, 9/30/19.

Consumers shifting their purchases from traditional stores to online are big part of the problem. In fact, consumer spending remains strong and unemployment is at about a half-century low below 4%.  But fears of a downturn loom. Other major economies are already in or near recessions. … A survey by Duke University found that two-thirds of chief financial officers expect a recession by the end of 2020.  [An important part of the problem is that] many retailers have borrowed heavily.  “If the economy were to struggle, it would accelerate the collapse of a lot more of the debt-financed retailers. And you would see an acceleration in store closures,” said Greg Portell, lead partner in the global consumer and retail practice of consultant AT Kearney.  … “Their future depends on them being able to find financing,” he said.

If large numbers of retail workers continue to be laid off, some workers will find new employment.  But it is often at lower pay, part time, and with greater uncertainty of future employment. An unknown but substantial number will, as Sarah Butler noted above in the context of UK job loss is that “many would find it difficult to transition to new roles.”  This transitioning to new roles is particularly challenging in an economy in which jobs of all kinds are disappearing and where many of the retail workers lack the skills and backgrounds for more advanced work situations.

An emerging and serious problem, as indicated above in Khrystal Hu’s report, is that the job cuts may harm women more than men.  The reason is that women tend to be found in sales clerk and cashier positions while men do more physical, warehousing and lifting as well as delivery work.  The physical ability typically associated with men transfers more easily to the needs of online companies with large scale warehouses, packaging and delivery activities making up a great part of their current employment portfolio.  

This is where the rapid developments taking place in AI/robotics “rear their ugly heads” again.  Greater physical capability for heavy lifting and the like is almost certainly only a temporary advantage for men.  Amazon, Walmart, China’s Alibaba and others are investing very large sums into developing robotic workers that are capable of doing all the kinds of warehousing, sorting, packing and delivery activities that at this moment provide an advantage for men over women.  The physical edge possessed by men in that type of work will be replaced by AI/robotics systems in the near future.  The robots already being produced by Boston Dynamics and MIT are advancing by leaps and bounds (literally) and they are only a small part of the robotics advances being made.

As to the sheer scale of what is occurring, Mary Hanbury explains.

American malls are dying out.  Retail complexes all over the US are being clobbered by store closures sweeping the country.  Retailers have announced more than 8,600 closings so far in 2019 and according to a report done by Credit Suisse in 2017, between 20% to 25% of malls will close by 2022.  A national retail apocalypse has crippled US malls as anchor stores such as Macy’s and Sears, which take up large retail spaces and drive foot traffic, have shuttered stores and left malls with enormous gaps to fill. For many malls, this is an impossible task.

Killing Local Communities

In the context of protecting retail jobs we need to think about the deeper meaning of the “retail apocalypse”. In the US, physical stores and shopping malls employ 15.8 million people in various types of work activities, with another 3 million in the UK.  The physical “bricks and mortar” stores not only “take” through earnings on the sales of products but “give” back by employing workers.  These workers are local consumers whose spending and tax payments are vital parts of sustaining dynamic and healthy social and economic environments for thousands of local communities throughout the US.  Shopping malls create clusters of retail sales activities centered on the attraction of large anchor stores that draw in consumers to other retail outlets.  

The economic dynamism created by these diverse “local” retail institutions not only supports workers directly employed in the jobs created by the retail outlets, but stimulates full and part time employment in a host of other work activities.  This is because, as consumers, the retail workers are not only purveyors but purchasers of goods and services.  The workers and stores provide a healthy tax base for the needs of local communities, including schools, police and fire security, and local government services. 

When that localized dynamism weakens or disappears due to the shutdown of critical centers of employment, as is now happening with growing speed with the prediction that 75,000 more retail stores will close by 2025, the economic health of an area erodes as stores lay people off, try to hang on in the face of an economic decline and ultimately close.  See, “‘Retail apocalypse’ now: Analysts say 75,000 more U.S. stores could be doomed”, Abha Bhattarai, Washington Post, 4/10/19.

As the varied reports below indicate, the growing dominance of online shopping is spreading rapidly.  One reason is that AI marketers are relentless.  Once we start a search for goods and services online, AI apps launch an online version of Chinese Water Torture.  This strategy is aimed at wearing us down and persuade us that we really want and need whatever they are selling.  For example, I (David) recently began searching for a deal on a plane ticket to Las Vegas.  Over a two week period I have received seven or eight hyped up e-mails each day informing me that I have received or “scored” a “great” new offer that can’t be matched.  But over two weeks and 80-100 “wonderful” offers that apparently are only available to me because of my special qualities, at best the price offered remained the same.  

By shifting our habits to buying things online we are destroying a significant part of the localized physical employment base on which our communities depend.  While companies like Amazon may employ large numbers of people in a very limited number of “Fulfillment Centers”, that handful of massive locations have no physical presence other than in the limited territory their very large warehousing, packaging and shipping operations are located.  Of course they have major impacts on the specific places in which they locate, but while their operations may employ a significant number of people, the benefits flow mainly to a very specific location rather than being broadly diffused to numerous local communities.  This takes away from those other communities critical job and tax benefits that their local stores and jobs provided.

In the AI/robotic context , there is an irony in the fact that Amazon’s working conditions in these massive operations are also being condemned by their workers as inhumane to the point that the workers often feel they are being treated like “robots”.  We continually ask, “where have all the jobs gone” or “why isn’t anyone shopping at the mall, or Sears, or Macy’s” and “why are there so many boarded up storefronts”?  While there are a variety of contributing factors, at the heart of the matter is our own consumer decisions and the fact that we prefer the ease and time savings involved in on-line shopping and are selling out our own future in doing so.  

In other words, the competitive retail market is using AI and the Internet to implement business models they consider the best means of earning profits and attracting market share.  For the moment that is true, but in a not all that distant future the underlying system from which profits are now being extracted is almost certainly going to collapse as companies like Amazon parasitically extract the “blood” in their search for the highest profits.  It is not sustainable.  

The abysmal stupidity of it all is that we consumers are suicidally complicit in this process.  This is because we are trading the health of our local communities and families for the ease of online shopping and the price benefits of dealing with an online retail system that sells goods at lower prices.  They can do this because, like Amazon, they have negotiated huge subsidies and tax relief from states and cities in exchange for locating their “Fulfillment Center” in their locale and have reduced costs of operation given the economies of scale their system allows.  They know quite well that “size does matter”.

The sellers of goods and services can’t help themselves.  They are doing what they need to do to compete and survive in the face of an industry that operates on narrow economic margins.  But workers and consumers in local areas whose livelihoods and futures depend on the health of their local stores and merchants are a main contributing part of the problem because they are willing participants in their own tragic downfall.  This is because the transition to buying through e-commerce and away from physical stores is being driven by the workers and consumers in the stores and localities most negatively affected by such decisions.  

Consumers Are Drowning in Debt

The desire for greater ease, a bit lower price and less hassle means what is really being “consumed” is the quality and sustainability of their own communities, including their scope of work opportunities and their quality of life.  This problem is also going to be relatively short-lived.  Data suggest that US consumers are close to being “maxed out” in terms of access to the credit that allows them to spend.  That topic is discussed in a forthcoming post related to public and private debt loads, but it poses a serious issue about consumers’ purchasing power.  

This is raised in the following reports related to the conditions being experienced by the American consumer.  It is not difficult after reading those excerpts to conclude that, whether the consumer activity is done in store or online or in a hybrid mix of purchasing strategies, in the end it probably isn’t going to make all that much difference.  The ability of consumers to buy products and services is going to be reduced dramatically as credit options are increasingly limited.  A sampling of what people are facing in incurring consumer debt is offered below.  Americans are piling on credit card debt, despite recession warnings: Credit card debt usually increases around the holiday shopping season — not in the middle of July”, Martha C. White, 9/10/19. “[A]nalysts who study consumer spending habits say there’s a real debt risk much closer to home: The amount and pace at which American consumers are racking up credit card debt.” “Bottom 50% of Consumers Are Showing Signs of Weakness, UBS Says”, Claire Boston, 7/11/19.  

Lower-income U.S. consumers are showing signs of weakness despite the strong market, and if the economy enters a recession, any possible credit crunch could be “material,” according to UBS. … Debt burdens for many of those households have grown as credit card interest rates hit record highs and student loan borrowings surged. … “Given low real wage growth and limited financial asset exposure it is hard for the lower tier to improve savings,” the strategists wrote. “Nearly 1 in 5 Americans are stashing cash at home in fear of a recession”,  Megan Leonhardt, 10/10/19.  Consumer debt is set to reach $4 trillion by the end of 2018”, Lorie Konish, 5/21/18.  “Consumer debt has grown since 2012 and is poised to reach a new high by the end of this year.  Individuals are spending about 10 percent of their income each month paying nonmortgage debts including auto loans, credit cards, personal and student loans.”  The American consumer is loading up on debt: Total US household debt soars to record above $13 trillion”.  

Total household debt rose to an all-time high of $13.15 trillion at year-end 2017, according to the Federal Reserve Bank of New York’s Center for Microeconomic Data.  The report said it was fifth consecutive year of annual household debt growth with increases in the mortgage, student, auto and credit card categories.  Mortgage debt balances rose the most in the December quarter rising by $139 billion to $8.88 trillion from the previous quarter. Credit card debt had the second largest increase of $26 billion to a total of $834 billion. 

pastedGraphic.png “Cash-Strapped Americans Are Willing to Leverage Their Homes to Pay the Bills”, Riley Griffin, 9/19/18. “As U.S. household debt rises and wages stagnate, millions of Americans are thinking about tapping into home equity to keep up with day-to-day expenses.  Twenty-four million homeowners believe borrowing against home equity is an acceptable way to cover regular bills, according to a report released on Wednesday.” “1 in 4 Americans defaulted on their student loans, study finds”, Sarah Min, 11/7/19, Moneywatch.  With total college debt at a record high $1.5 trillion, the findings highlight the challenges millions of Americans face in paying off their loans.” “Median U.S. Household Income Showed No Growth in 2018:

Median income was $63,179, essentially flat from a year earlier after three years of increases”, Janet Adamy and Paul Overberg, 9/10/19.  Yes, Robots Are Hurting Your Pay, Fed Study Finds”, Simon Kennedy, 10/1/19.

“Automation has “contributed substantially” to reducing the portion of national income that goes to U.S. workers over the past two decades, according to a new study by economists at the Federal Reserve Bank of San Francisco. Despite the lowest unemployment rate in around 50 years, the so-called labor share has fallen to about 56% from 63% in 2000 and the increased use of robots and other technology has been an important driving factor, the economists Sylvain Leduc and Zheng Liu wrote in the report published on Monday.  Businesses have more options to automate hard-to-fill positions now than in the past,” wrote Leduc and Liu. “With rapid advances in robotics and artificial intelligence, robots can perform more jobs and tasks that required human skills only a few years ago.”  The upshot is that workers become more reluctant to ask for significant pay hikes out of fear that their employer will turn to automation to replace them, the economists said. That potentially explains why wage growth has been relatively weak despite the tightening labor market.”  Families Go Deep in Debt to Stay in the Middle Class: Wages stalled but costs haven’t, so people increasingly rent or finance what their parents might have owned outright”, AnnaMaria Andriotis, Ken Brown and Shane Shifflett, 8/1/19. 

 The American middle class is falling deeper into debt to maintain a middle-class lifestyle. Cars, college, houses and medical care have become steadily more costly, but incomes have been largely stagnant for two decades, despite a recent uptick. Filling the gap between earning and spending is an explosion of finance into nearly every corner of the consumer economy.”  Eyeing That Sweater? It’s Yours in Four Easy Payments: Fintech firms pitch installment plans to consumers increasingly reliant on borrowing”,  AnnaMaria Andriotis and Peter Rudegeair, 9/29/19.

Gone are the days when special financing plans were mostly reserved for big-ticket purchases like TVs and refrigerators. Now, sweaters, makeup or other everyday items can be paid for in installments with loans or other payment plans offered at checkout with thousands of merchants in the U.S…. Merchants and lenders are tapping into the financial challenges many U.S. families are facing. Despite signs of a strong economy, like low unemployment, consumers are increasingly relying on borrowing to fund their daily lives. U.S. consumer debt is higher than ever, as cars, college, housing and medical care grow more expensive but incomes stay largely stagnant. “Personal loans are ‘growing like a weed,’ a potential warning sign for the U.S. economy”, Heather Long, The Washington Post, 11/21/19.  

Americans are hungry for personal loans that they can use as quick cash to pay for anything from vacations to credit card debt, a potential red flag for the economy.  Personal loans are up more than 10% from a year ago, according to data from Equifax, a rapid pace of growth that has not been seen on a sustained basis since shortly before the Great Recession. … “Definitely yellow flares should be starting to go off,” said Mark Zandi, chief economist at Moody’s Analytics, which monitors consumer credit. “There’s an old adage in banking: if it’s growing like a weed, it probably is a weed.” 

More on the Retail Apocalypse

In this post we are attempting to highlight the speed and scale of the “Retail Apocalypse”.  This is done by presenting reports below that reveal what is occurring.  This “Apocalypse” is being driven by the emergence of easy on-line shopping, and that is made possible due to the Internet and Artificial Intelligence applications that offer the ability to purchase goods and services with a simple click of a computer button.  The market share of online shopping has grown with incredible rapidity and is enhanced by the development of AI applications that use “Cookies” to track us and develop profiles aimed at convincing us they know what we desire. “Mall vacancies reach post-recession high as department stores vanish”,  Daniella Genovese, 10/4/19.

In February, Payless ShoeSource decided to close all 2,100 U.S. stores. Gymboree has shut down its remaining 750 stores, and fast-fashion retailer Forever 21. filed for bankruptcy this week and will close as many as 178 of its 700-plus U.S. stores.  Sears, the Amazon of the pre-Internet area, filed for bankruptcy protection in late 2018, after closing many of its U.S. stores, and Toys ‘R Us, hobbled by $5 billion in debt and more intense competition, did the same about a year earlier.  As of April 2019, store closures exceeded the total recorded for all of 2018, says Coresight Research, a global research and advisory firm.  Offering shoppers new experiences isn’t helping as malls see tsunami of store closures, falling traffic”, Lauren Thomas, 4/15/19.  There’s No End in Sight for the “Retail Apocalypse””, Mac Slavo, 9/25/19.

[T]he argument could be made store closures are only pushing more people to shopping on desktop computers, tablets and mobile phones —which is usually a less profitable transaction for retailers due to free shipping costs and investments in building out digital capabilities. “More than 9,300 stores are closing in 2019 as the retail apocalypse drags on — here’s the full list”, Hayley Peterson, 11/26/19.  “Retailers have announced more than 9,300 store closures so far this year, according to an analysis by Business Insider.”  Epidemic of empty stores threatens more metro Detroit shopping malls”, JC Reindl, Detroit Free Press, 10/1/18.

An epidemic of shuttered storefronts and liquidating department stores continues to plague many of metro Detroit’s enclosed shopping malls, threatening the existence of some once-thriving properties that couldn’t keep up with retail changes or simply have too much empty space to fill.  This shopping mall shakeout is the result of nonstop growth in Internet shopping and more closures of traditional mall anchor stores such as Macy’s, JC Penney, Sears and Carson’s. The same phenomenon is happening across the country; some analysts have predicted that up to 25 percent of malls nationwide could close by 2022.  Numerous malls have lost one or more department store anchors that they haven’t replaced, including Eastland Center in Harper Woods, Westland Shopping Center, Laurel Park Place in Livonia, Lakeside Mall in Sterling Heights and Fairlane Town Center in Dearborn.  “’It’s like the death of a loved one’: as stores close, retail workers lose out to big tech“, Joe Eskenazi, 7/4/18.  “It’s becoming a common story across America: the opening of an Amazon ‘fulfilment center’ hastens the end of local department stores, like this Sears in Sacramento.”  Malls Vacancies Hit Six-Year High as Online Shopping Takes a Toll: Toll is felt across all types of brick-and-mortar outlets in the U.S. as iconic retail names close stores”.

E-Commerce  Merry Clickmas: Black Friday online sales hit record $7.4B”, Associated Press, 11/30/19.  “This year’s Black Friday was the biggest ever for online sales, as fewer people hit the stores and shoppers rang up $7.4 billion in transactions from their phones, computers and tablets.”  US consumers spend $2bn online but store crowds thin as Black Friday dawns: Shorter holiday season also puts pressure on retailers”, Reuters, 11/29/19.  “US consumers spent more than $2bn online in the first hours of Thanksgiving shopping on Thursday night but crowds were largely thin at retailers on the eve of Black Friday, reflecting the broader trend away from shopping at brick-and-mortar stores.”  Walmart’s rise in e-commerce: Is retail going extinct?”, Angelica Stabile, 9/13/19.  US retail sales unexpectedly decline in a sign that consumer economy could be cracking”, Thomas Franck, 10/16/19.  Online Shopping Is Growing, But Isn’t Creating Jobs:

Internet sales are still rising briskly. Employment in the sector is not”, Justin Fox, 12/10/19.

This has not been a great century for working in retail. The sector, which added about 5 million jobs from 1980 through the end of 2000, has added only 416,100 since. Since January 2017, retailers have shed 145,200 jobs even as overall employment growth has remained strong.  The obvious explanation here is the rise of online shopping. Nonstore retailers such as are included in the above retail employment totals, but with employment of 570,500 as of November they simply haven’t created enough jobs to make up for the stagnation in the rest of the sector. Retail job losses mount, women impacted more than men”, Krystal Hu, 3/8/19.

Women and men may not feel the same level of pain in the retail apocalypse. In the past year, women lost jobs in the industry overall while men had a net gain in retail jobs, according to the latest analysis from the Institute for Women’s Policy Research (IWPR) based on U.S. Bureau of Labor Statistics data. … In 2018, 73.8% of cashiers, one of the most common jobs in physical stores, were women. While among truck drivers, a profession that is in high demand nowadays, only 6.6% were women, according to the U.S. Bureau of Labor Statistics.  And men could be in a more advantageous position to capture the job growth in the e-commerce industry. “The types of jobs that are going away are cashiers, salespeople, customer-facing roles,” said [Andrew] Challenger. “The jobs that are hiring for retail are back in the distribution and warehouses jobs, technical jobs have been traditionally been dominated by men.

“De-Humanized” and Robotic Stores: the Movement Toward Employee-Free “Cashier-less” Stores  Amazon Will Consider Opening Up to 3,000 Cashierless Stores by 2021”, Spencer Soper. Inc. is considering a plan to open as many as 3,000 new AmazonGo cashierless stores in the next few years, according to people familiar with matter, an aggressive and costly expansion that would threaten convenience chains like 7-Eleven Inc., quick-service sandwich shops like Subway and Panera Bread, and mom-and-pop pizzerias and taco trucks.  “Robot in aisle 3: Retail turns more and more to machines”, Hiawatha Bray, 5/26/19.  

“[Marty] is one of about 500 robots that Stop & Shop’s owner, the Dutch company Ahold Delhaize, has deployed in some of its US grocery stores. And in the process, Ahold is doing its part to normalize robots in public places.  … Walmart … is deploying hundreds of machines to scrub the floors of its stores and take inventory by scanning the shelves. Companies such as Starship Technologies and are testing robots that roll down sidewalks delivering pizzas and soda pop in Seattle, London, Beijing, and other cities. [T]he rise of robots may threaten the jobs of millions of workers, such as those who went on strike earlier this year at Marty’s home base, Stop & Shop.”  “Robots will take our jobs. We’d better plan now, before it’s too late”, Larry Elliott, 2/1/19.  

The opening of the Amazon Go store in Seattle brings us one step closer to the end of work as we know it.  A new sort of convenience store opened in the basement of the headquarters of Amazon in Seattle in January. Customers walk in, scan their phones, pick what they want off the shelves and walk out again.  At Amazon Go, there are no checkouts and no cashiers.” “ROBOTS IN AISLE TWO: Supermarket Survival Means Matching Amazon—The Amazon threat has forced the stodgy grocery industry to experiment with smart carts, dynamic price tags and in-store delivery warehouses”,  Matthew Boyle, 12/2/19.

Armed with algorithms, robotic warehouses and cashierless stores, Inc. is commonly seen as an existential threat to traditional grocers. In recent weeks alone, Amazon confirmed plans for a mainstream supermarket to complement its pricey Whole Foods Market chain, and the company plans to bring its automated checkout technology to full-size supermarkets.  … Animated by the threat … [other supermarkets are] rushing to out-innovate the Seattle leviathan before it’s too late.  The advancements—being tested by everyone from mighty Walmart Inc. to small regional chains—include shelf-scanning robots, dynamic pricing software, smart carts, mobile-checkout systems and automated mini-warehouses in the back of stores.  Stop & Shop owner beefs up robots, AI as US labor market tightens”, Jade Scipioni, 11/14/18.

The world’s eighth biggest food retailer and owner of Stop & Shop is upping its stake in the U.S. grocery war with mini robotic supermarkets.

Ahold Delhaize announced Tuesday it will roll out small, automated warehouses at certain Stop & Shops across the country to speed up ordering and delivery times to online shoppers and to help them as they struggle to recruit in the tight labor market.The Netherlands-based company said it has partnered with tech software company Takeoff to build the small warehouses that will use robot arms to stack groceries and assemble shopper’s online orders.  In addition to robots, Stop & Shops will also roll out “frictionless checkouts” so customers can use their mobile app to scan items as they’re shopping, without having to wait in line. “Spurred by Amazon, Supermarkets Try Swapping Cashiers for Cameras: More retailers are embracing product-recognition technology pioneered by Amazon”, Parmy Olson, 7/7/19.  Booming jobs market is leaving the retail industry behind”, Thomas Franck, 4/6/19.

Since January 2017, retail has lost more than 140,000 jobs; the sector added to that in March 2019 with a loss of more than 11,000, according to Labor Department data. … “Broadly speaking, retail is a sector where automation has been particularly present. Self-checkouts are now common. If you’re not sure about a price, you scan the bar code rather than asking a worker,” Nathan Sheets, chief economist at PGIM Fixed Income.  Walmart announced earlier this year that it is expanding its “Scan & Go” technology to an additional 100 locations across the U.S. For consumer staples like groceries that customers still don’t feel comfortable purchasing online, Kroger’s new “Scan, Bag, Go” platform will allow shoppers to scan their items themselves and allow the chain to cut cashiers at 400 locations. The push toward automation checkouts comes as major retailers and supermarkets come under pressure to generate even more profit out of a razor-thin margin business while offering customers a unique shopping experience.  As a related point, the ongoing shift in retail from bricks and mortar to online very much reinforces this trend.

Conclusion: If All These Stores Are Closing How Can Job Statistics and the Stock Market Look Good?  Thousands Of Major Retail Stores Close Despite Strong Economy”, 9/30/19.

The retail sector has lost nearly 200,000 jobs since the start of 2017, with most of those jobs losses coming from traditional department stores and clothing stores. The job losses across the sector would have been worse had it not been for some new players moving into vacated stores. In a recession, those store openings are likely to slow, and store closings are likely to increase.  … If unemployment increases, as it does in a recession, it will be harder for laid off retail employees to find jobs. 

Even though data indicate that as of the end of November 2019 at least 21,824 US stores had been closed by the companies that operated them between 2017 and 2019 there are several reasons  employment levels and stock prices can appear so good in the face of those store closings.  The first is that in many instances the companies did not go out of business—although some did including Payless and Dress Barn.  But in many instances the closing represented the deliberate shrinking, redirection or consolidation of companies’ assets and operations.  In others, if the company was dependent on the foot traffic of mall consumers drawn in by one or more anchor stores that had moved out of the mall then the drop in consumers at physical locations dictated the individual store closing response.  

A third reason is that, given current economic conditions, companies sometimes need to make decisions about whether they have too much excess capacity and need to dump underperforming assets that are hurting the “bottom line”.  In numerous instances that surplus capacity was created by the consumer shift to e-commerce.  This realignment of capacity to fit within competitive reality relates directly to the valuations we now see on the stock market.  From a business perspective making intelligent strategic decisions to incur a short term loss by discarding underperforming assets shows investors that a company is headed in the right direction from the viewpoint of its economic health.  This generates an uptick in share value.  Done strategically, cutting corporate “fat” or eliminating underperforming stores results in improvements in share price and eliminates costs while freeing up resources for reinvestment or shareholder distribution.  

Another reason for closings and shrinkage of a company’s physical “footprint” is that companies are trying to figure out the best balance between in-store and online sales offerings.  This includes Tesla Motors that shifted entirely from physical sales locations to online sales.  It also applies to Walmart and many other larger stores that offer online search order product catalogs that allow consumers to order a range of products online with pickup in only a few days at a location near them.  Such a strategy also has the advantage of bringing consumers back into physical locations where they might decide they need additional goods and services.  “Booming jobs market is leaving the retail industry behind”, Thomas Franck, 4/6/19.

[M]ost [analysts] agree that the downtick in the number of people working at big-box retail locations has to do with the rise of e-commerce and technology.  “Broadly speaking, retail is a sector where automation has been particularly present. Self-checkouts are now common. If you’re not sure about a price, you scan the bar code rather than asking a worker,” Nathan Sheets, chief economist at PGIM Fixed Income.

As an example the thriving shift toward automation at retailers nationwide, Walmart announced earlier this year that it is expanding its “Scan & Go” technology to an additional 100 locations across the U.S. For consumer staples like groceries that customers still don’t feel comfortable purchasing online, Kroger’s new “Scan, Bag, Go” platform will allow shoppers to scan their items themselves and allow the chain to cut cashiers at 400 locations. … The push toward automation checkouts comes as major retailers and supermarkets come under pressure to generate even more profit out of a razor-thin margin business while offering customers a unique shopping experience.

At this point some will respond “That’s Capitalism” or “Free Market” or “Survival of the Fittest” or “The Big Dog Gets to Eat the Little Dog” or some other inane comment aimed at rationalizing.  Daniel and I believe deeply in “The Market” as a beneficial force when done with an understanding of its limits. That belief includes the creative and economic importance of the private sector.  But we also recognize that when a handful of private sector economic actors are allowed to gain an operational scale so far beyond anything that could be considered within the range of “normal”, then the power and destructiveness of those dominant actors is far off the scale to the point the system needs to understand the importance for the political community of setting limits on the power of the monopoly or “quasi-government” of immense economic monoliths whose only loyalty is to themselves.

The Greatest Shift Since The Dawn Of Humankind

David Barnhizer and Daniel Barnhizer

This post begins a set of what will be quite a few blog posts containing analyses and links to a variety of events occurring with great rapidity. A core purpose for a number of the posts is to provide specifics on the job losses that are already occurring, as well as predictions of the job categories that will be increasingly affected.  We find that the various projections being made as generalities that conclude jobs will be eliminated in the many millions tend to leave people with either a sense of disbelief or a feeling of helplessness.  We therefore want to at least attempt to make the picture of what is and will occur sufficiently concrete so we can begin talking about specific steps to deal with what we face.

The posts are intended to present ongoing developments and reports that suggest the amazing speed at which changes are occurring, technology advancing, and human jobs being lost or threatened on a significant scale.  They also describe other extremely serious matters such as health care needs and costs, pension security, the  demographics of aging societies that have been called the “Age Curse”, governmental revenue loss as tax paying workers shrink in number, along with the challenges posed by of out-of-control public, individual and corporate debt loads.

Such matters are included because the ability to fund critical needs and otherwise support governments, institutions, communities and individuals depend on the health of our economic systems and the revenues and opportunities they generate.  That health also depends on the ability of nations to alter their methods of taxation given the reduction in labor-based tax revenues that will occur as the benefits of economic activity shift more from labor wages to capital.  The adjustment will require new strategies of taxation and achieving that will be an extreme challenge.  As is seen throughout the series of posts, and as developed at length in The Artificial Intelligence Contagion, those institutions, needs and capabilities are intimately related to the degree to which AI/robotics negatively impacts the economic, social and political health of the US and other nations.  

In describing what is happening as “the greatest shift since the dawn of humankind” in his 2016 presentation to the World Economic Forum in Davos, Silicon Valley guru Vivek Wadhwa, a Distinguished Fellow & Adjunct Professor at Carnegie Mellon University’s School of Engineering at Silicon Valley as well as Distinguished Fellow at the Labor and Worklife Program at Harvard, warned about the nature and scale of what we are experiencing.

“We are only just commencing the greatest shift that society has seen since the dawn of humankind. And, as in all other manifest shifts – from the use of fire for shelter and for cooking to the rise of agriculture and the development of sailing vessels, internal-combustion engines, and computing – this one will arise from breathtaking advances in technology. This shift, though, is both broader and deeper, and is happening far more quickly than the previous tectonic shift.” [He added]:  The distant future is no longer distant. The pace of technological change is rapidly accelerating, and those changes are coming to you very soon, whether you like it or not.”  Technology could be the best or worst thing that happened to inequality”, Vivek Wadhwa, 8/11/16. 

The Artificial Intelligence Contagion

Our recently published book, The Artificial Intelligence Contagion: Can Democracy Withstand the Imminent Transformation of Work, Wealth and the Social Order? (Clarity 2019), focuses on the ways AI/Robotics is affecting the human world of work, economics and social activity.  This orientation includes concerns about wealth distribution and inequality, resource sufficiency, growing health care needs and chemical and digital addictions, homelessness, and financial uncertainty.  Other core issues include invasions of privacy, the emergence of all-encompassing surveillance systems that expand governments’ power to monitor, propagandize and control their populations, and the weaponization of AI systems.  

Among the many things that must be done is changing our existing tax strategies to take into account the increased transfer of economic returns from labor to capital.  This poses an enormous methodological and political challenge.  The difficulty involves understanding realistic methods for extracting essential funds from a transformed economic environment without undermining the health of that generative activity.  Along with that are the political obstacles involved in tax reform.  These relate to being able to achieve the level of political will required to gain support even if we are clear about what is needed.

At the core of the analysis in Contagion is our strong belief—shared by many and decried by others—that AI/robotics development and implementation is in the process of undermining human employment in unprecedented ways that short circuit expectations.  Those others feel equally strongly that what we are experiencing is simply one more economic and technological cycle that will lead to a new and wonderful “advanced” world where everyone will be happy, nurtured, provided with all the necessities of life and cared for by a compassionate society. 

As suggested above, we believe deeply that the evolving transformation based on AI/robotics is fundamentally different from the cyclical dynamics described by political economists such as Joseph Schumpeter in his description of a cycle of “Creative Destruction” and Nikolai Kondratiev in his concept of “Long Waves”.  The most important reason for the difference is that AI breakthroughs are being created that will be capable of fulfilling the kinds of sophisticated tasks many assume would otherwise naturally represent the “brave new world” presented to us at the end of this ongoing technological cycle some call the Fourth Industrial Revolution.  

But even if this somehow turns out to be a cyclical phenomenon in the sense defined by Schumpeter or Kondratiev, the harsh reality is that it would be a matter of forty or fifty years before the system regains a healthy equilibrium.  During that period the US and other nations would be experiencing turmoil, violence, political breakdowns and suffering on a scale that would tear societies apart.  So whether we are talking about a long term cycle or the permanent displacement of massive numbers of human workers we are in the process of creating a tragic and fundamentally disruptive world with which we are ill-equipped to cope.

All Kinds of Jobs Are Threatened

Key analysts whose work focuses on job creation, economics and trends, have echoed Vivek Wadhwa’s concerns.  Their analysis includes the important fact that many of the jobs lost to automation will be in what we think of as unique or protected categories.  An excerpt from the Abstract of “Toward understanding the impact of artificial intelligence on labor” include the following warning.  Unlike previous technologies, examples of AI have applications in a variety of highly educated, well-paid, and predominantly urban industries, including medicine, finance, and information technology.”  The researchers explain:

“Rapid advances in artificial intelligence (AI) and automation technologies have the potential to significantly disrupt labor markets. While AI and automation can augment the productivity of some workers, they can replace the work done by others and will likely transform almost all occupations at least to some degree. Rising automation is happening in a period of growing economic inequality, raising fears of mass technological unemployment and a renewed call for policy efforts to address the consequences of technological change. … Unlike previous technologies, examples of AI have applications in a variety of highly educated, well-paid, and predominantly urban industries, including medicine, finance, and information technology.” “Toward understanding the impact of artificial intelligence on labor”, Morgan R. Frank, David Autor, James E. Bessen, Erik Brynjolfsson, Manuel Cebrian, David J. Deming, Maryann Feldman, Matthew Groh, José Lobo, Esteban Moro, Dashun Wang, Hyejin Youn, and Iyad Rahwan.  PNAS April 2, 2019 116 (14) 6531-6539; first published March 25, 2019 Edited by Jose A. Scheinkman, Columbia University.

An economics scholar at Dartmouth summed it up as a situation where: “Whether you like it or not what the global economy is delivering is that the productivity growth that has been realized has been earned by a small fraction of highly skilled people and returns to capital.”  While that “small fraction” of our workforce benefits to extraordinary degrees and the owners of capital even more, many others are being left out of the benefits of the economic developments and wealth creation produced by the AI/robotics phenomenon.  

Howard Schneider echoes this perspective in his observation that:

Employment growth at the largest U.S. companies has lagged far behind increases in revenue and operating profit since the start of the century, as firms reaped the benefits of globalization, technology, and other ways to operate more productively, according to a Reuters analysis of corporate data.  From 2001 to 2013, inflation-adjusted revenue at 100 of the largest publicly traded companies grew 71 percent and inflation-adjusted operating profit rose 150 percent.”  Howard Schneider, “For largest U.S. companies, jobs growth has lagged profits, revenues”, Business News, 8/11/14. 

We Must Preserve and Create Jobs for People

Our commitment must be to the preservation and development of human jobs.  We firmly believe that nothing is more critical to protecting the health and well-being of people in modern societies than preserving, defending, developing and offering improved access to work for as many people as possible.  This includes the conviction that we have to change the view that, in terms of generating and sustaining work and ensuring the health of our society, the only standard to which we should adhere is reflected in the economic mantras of “productivity” and “efficiency”.  

Standards fixed too narrowly on a single element of economic return for investors cannot be allowed to be the sole or controlling virtue dictating our policy and actions.  Innovation, economic growth, inventiveness, entrepreneurial and creative activity are critical human attributes.  But from the perspective of healthy and sustainable communities they not only exist to create an environment that allows individuals to develop their talents, but because the society within which these abilities operate creates the rules and structures that allow such activity.  This is done both to unleash human creativity and energy and with the purpose of advancing the overall quality and sustainability of the society itself.  They are interacting and complementary elements in our social dynamic.  In that context, what we have too often ignored is the fact that economic “productivity” and “efficiency” are tools, not ends in themselves.  In the AI/robotics dimension we are well on the way to a destructive misuse and extreme over-emphasis of those tools.