GM Layoffs: Towards a people-free economy?

Why is Fox News afraid of upsurge socialism in America?

And it’s “not a Democratic Socialist, just a straight-up socialist”!

One reason is that they see – regardless of their uber-Capitalist stance – corporations engorging themselves on the wealth of the nation. Specifically, Fox Business analyst, Chris Payne commenting on GM’s decision to lay off nearly 15,000 workers said:

“And again, it's not like they're in dire straits. Now, they're trying to get ahead of things, they want a big fat cash flow. But this is why, I think, capitalism in and of itself is in a lot of trouble in this country…Because these companies keep posting record earnings and they keep firing people. They keep posting record earnings and they buying back billions of dollars of their own stock. The American public is going to get hip to this and my fear is that they're going to end up electing, not a Democratic Socialist, just a straight-up socialist because of these kind of shenanigans. They should have saw this coming a long time ago.”

What does this have to do with automation? 
The interesting aspect about the layoffs, from a technology perspective, was that it was mostly white-collar workers that were impacted - 8,000 workers according to New York Times.  The article went on to say:

"The cutbacks reflect a transformation underway in both the auto industry and the broader U.S. economy, with nearly every type of business becoming oriented toward computers, software and automation."

According to this clip from the CBC's the National, Goldman Sachs slashed its cash equity from 600 to 2, but gets the same amount of work done because those traders have been replaced with 200 computer engineers. Furthermore, the expectation is that between 1.5 to 7.5 million white-collar jobs will be lost due to automation.


But what does all this have to do with a people-free economy?

For that, we have to go back an exchange that is said to have happened at a Ford plant:

"Henry Ford II showing Walter Reuther, the veteran leader of the United Automobile Workers, around a newly automated car plant. “Walter, how are you going to get those robots to pay your union dues,” gibed the boss of Ford Motor Company. Without skipping a beat, Reuther replied, “Henry, how are you going to get them to buy your cars?"

The Capitalist economic system is a system that maximizes the freedom of ownership by focusing on investments. Everything else is secondary. Sometimes people in society can impose a cost on the Capitalists that forces them to accommodate them. However, the Empire inevitably Strikes Back. For example, the concessions made to labour unions in 1930s (that upheld Capitalist beliefs) was temporary. Once Communism was dead, these unions were destroyed through the Volcker interest rate hikes in the 70s, globalization and the non-enforcement of labour laws (meaning the government let the companies commit illegal acts).

However, given this, people should realize that the right number of workers at a company is zero. That is, if one can get more output from investment in machines instead of HR, there is no law or other mechanisms that will force a corporation to hire people.

Check out what Andy Puzder, CEO Carl’s Jr, told Business Insider after visiting the fully automated fast food chain Eatsa:

“With government driving up the cost of labor, it's driving down the number of jobs…You're going to see automation not just in airports and grocery stores, but in restaurants… They're always polite, they always upsell, they never take a vacation, they never show up late, there's never a slip-and-fall, or an age, sex, or race discrimination case.”

All doom and gloom or can innovation lead to hidden jobs? 

A good example of how innovation can lead to hidden jobs is the advent of recorded music. Recorded music, courtesy of the phonograph, would disrupt the piano. Prior to that time, pianos were the chief source of musical entertainment. Families would cluster around the piano and one of the relatives would play music. However, with the advent of the phonograph sales of pianos fell falling from their peak production of 400,000 pianos in 1905, while currently, production is a fraction at about 32,000. But what jobs did the phonograph – and the recording industry more broadly – create?

According to the same Freakonomics podcast, approximately 600,000 in total (200,000 in radio and TV broadcasting, 300,000 in motion-picture and sound recording and another 100,000 in the repair of electronic equipment).

Although this is likely a good way to think about the future, it is important to remember that the underlying economic system has no consideration for people. It's cold hard logic is about generating cash for the shareholders - even if it means laying off everybody. But it seems like the best way to do this is with the combination of man and machine - for now.

Author: Malik Datardina, CPA, CA, CISA. Malik works at Auvenir as a GRC Strategist that is working to transform the engagement experience for accounting firms and their clients. The opinions expressed here do not necessarily represent UWCISA, UW, Auvenir (or its affiliates), CPA Canada or anyone else