How Exactly Do Robots Destroy Capitalism?

The bourgeoisie cannot exist without constantly revolutionizing the instruments of production, and thereby the relations of production, and with them the whole relations of society.

 

This sentence, taken from The Communist Manifesto (1848), is an excellent starting point for understanding the end of the capitalist system. All of the following is packed within this one succinct sentence:

The essential nature of capitalism is one of constant technological innovation. The coercive power of competition forces the entire system to pursue ever increasing productivity, efficiency, and profitability. This is commonly heralded as one of capitalism’s greatest virtues. Capitalism is so successful at this that it ultimately revolutionizes itself.

As the revolution of the instruments of production progresses a point is eventually reached where conflicts arise with the old established relations of production. These relations themselves must be altered to allow the new forces to develop further. This is evident today in the Rise of the Robots and widespread technological unemployment this revolution will engender. Something in the familiar nature of the employer/employee relationship is going to have to change. The form this change will take will be will be determined by political and legal processes. A struggle will ensue over the direction of these processes. Thus the whole relations of society become involved. All arising endogenously, from the ineluctable logic of the capitalist system itself.

This process of social change is not unique to the final stage of capitalist development. For example, we see the same processes at work in the manner in which capitalism supplanted the feudal system.

But why do we say this is the end of capitalism and not merely the birth of some new incarnation of capitalism? How exactly do disruptive technologies disrupt capitalism itself?

The Rise of the Robots will strike three blows against the capitalist system from which it will not recover. They are:

1. The end of the capitalist mode of production
2. The decline of production for exchange value
3. The immiseration of traditional capital

Let’s consider each of these in turn.

1.The end of the capitalist mode of production.

According to historical materialism the various epochs of civilization (Marx mentions Asiatic, ancient, feudal, and modern bourgeois, for example) can be designated by their distinctive modes of production — that is, the tools the society has to work with and how it organizes itself to use those tools. Marx referred to these two elements of a mode of production as the means of production and the relations of production.

We are currently in the modern bourgeois mode of production, more commonly known as the capitalist mode of production. This mode is sufficiently distinct in its features to set it apart from both the feudal mode of production which preceded it and the post-capitalist epoch to come. This distinction is most easily seen by considering the capitalist relations of production, specifically the condition of the proletariat in capitalist relations.

The existence of a proletariat class is not the only distinct feature of a capitalist mode of production, but for brevity’s sake it is the only one we will consider here. It is sufficient to make the point that the Rise of the Robots will bring an end to the capitalist mode of production.

Capitalism rose to prominence over the old feudal world by besting it. The new and improved methods of mass production, division of labor, and the like, could produce goods of a reliable quality faster and more cheaply than the guild craftsmen could ever dream of doing. But the newly rising factories and industrial concerns needed employees — and not just any employees — but employees of a particular stripe. It would not do, for example, if these employees were also farmers who had to vacate their positions every so often for planting or harvest. It would not do if these employees had binding claims of fealty, as feudal life imposed. Capitalism, to function properly, needed employees who were free in a double sense, legally and politically free from feudal obligations, and “free” of any other way of supporting themselves. Thus, by destroying the old feudal mode of production, capitalism created a class of propertyless people utterly dependent on the new capitalist arrangements to survive — the proletariat.

This arrangement has held, more or less effectively, for the past couple hundred years or so. Now it is becoming apparent that this relationship is about to change dramatically. Most analysts foresee robots and other disruptive technologies replacing around 50% of the workforce in developed countries around the world over the course of the next few decades. (For more on this please visit the Rise of the Robot Economy section of this website.) If these numbers are even close to correct this indicates a radical breakdown of the current social contract.

Solutions are already being proffered such as a basic minimum income which everyone would receive simply for being a citizen. This may or may not be a good idea depending upon how it is administered, but either way, consider what this proposal entails. An income sufficient to sustain oneself independently signals, by definition, the end of the proletariat. Eliminate the proletariat and the capitalist relations of production are inexorably altered. When modes of production change new rules are required to protect the interests of the various parties affected by the changes. New laws are written, new politics emerge. All this is quite similar to the usurpation of the feudal system.

 

2. The decline of production for exchange value.

This is probably a second-wave effect, occurring as these new technologies mature and become ubiquitous. This change will undermine the purpose of capitalist production, crippling the process of surplus-value generation.

There are two reasons why I might want to produce something. The first is to generate a use value. I make something because I need or want it — a coffee table, bookshelf, or chair, for example.

The second reason is to generate an exchange value. I make something in order to exchange it for something else, preferably money.

Capitalist production operates solely for exchange value. A factory may make bikes, or computers, or lamps, but its owners do not want bikes, or computers, or lamps. They want profits. They produce these items to bring them to market and exchange them for money. Forget the bike, the computer and the lamp for now. What these factories are really in the business of producing is surplus value — an amount of value greater than the sum of the inputs required to manufacture the item exchanged. This surplus value is realized as net profit after the goods are sold and the bills are paid.

Nothing wrong with all this. It’s what makes the world go ’round. But it’s destined to end.

There is a prominent subset of these new technologies geared towards reducing production costs. This endeavor is as old as capitalism itself, and is, as has been often noted, what helps make capitalism so successful. But new technologies like three-dimensional printing and molecular manufacturing are potentially so disruptive they threaten traditional capitalist ventures.

The holy grail of cost-effective manufacturing would be something like an Aladdin’s lamp, or the Star Trek replicator. Just speak what you want and presto , it appears. Fantasy, right? Not really.

While still some time away, there are those who believe that such machines will be common much sooner than you might guess. One such individual is Neil Gershenfeld, director of MIT’s Center for Bits and Atoms. Gershenfeld believes twenty years is a realistic timeline and is already pondering how we will organize ourselves as a society in the day “when anyone can make anything.” (Watch an interview with Gershenfeld here.)

Let’s play the cynic and suggest that Gershenfeld is overly optimistic. Perhaps these machines won’t be available until thirty years from now, or maybe fifty. The point is they’re coming. And when they arrive they will undercut the profitability of production for exchange value.

You may be thinking, “Well, the company that makes those machines will be very profitable.” Yes, until the technology advances to the point where the machines are able to replicate working models of themselves. This step will not be very far behind. Then they will be essentially free. Maybe you’re thinking that the products the machine makes will be patented or copyrighted, ensuring profits for their creators. Sure, but ultimately open-source and public domain options will outcompete costly rivals. Designer or boutique offerings will be a niche market, an appealing option, but no longer the necessary staple. And barriers to market entry will be so low as to limit profitability to all but the most creative designers.

Today we see huge sums of money being invested in the development of driverless cars and artificial intelligence. Their arrival is inevitable. Tomorrow these game-changing technologies will be pursued with the same fervor. And the game they change will be capitalism itself.

 

3. The immiseration of traditional capital.

In classic Marxist theory the immiseration thesis describes how the capitalist’s utilization of improved technology devalues human labor, stagnates wages and leads to the economic impoverishment of the workers.

Things become much more interesting when we turn this around and examine how the introduction of these disruptive general-purpose technologies has the same effect on the accumulated capital side of the equation.

These are several studies indicating that digital capital, (robots, algorithms, AI, etc.) will devalue traditional capital holdings. I’ll mention two of them and then offer my own simplified explanation.

The National Bureau of Economic Research has issued a report titled Robots Are Us: Some Economics of Human Replacement. (NBER Working Paper No. 20941) The paper is over my head in regard to the mathematical analysis involved but the conclusions are obvious. The abstract begins with these words:

Will smart machines replace humans like the internal combustion engine replaced horses? If so, can putting people out of work, or at least out of good work, also put the economy out of business? Our model says yes.

Elsewhere they write, “In short, when smart machines replace people, they eventually bite the hands of those that finance them.”

The damage inflicted on the capitalist system is more than the destruction of its consumer base. It is an actual attack on the value of capital itself. As Erik Brynjolfsson, Andrew McAfee, and Michael Spence explain in an article titled Labor, Capital and Ideas in the Power Law Economy which appeared in the  July/August 2014 issue of Foreign Affairs Magazine:

In a world where capital such as software and robots can be replicated cheaply, its marginal value will tend to fall, even if more of it is used in the aggregate. And as more capital is added cheaply at the margin, the value of existing capital will actually be driven down.

 

There is an old maxim which states, “Too much capital kills the return on capital.” This is even more evident when the new capital is cheaply reproduced “digital” capital.

How so? Here’s my simplified interpretation.

Imagine you are one of the old-time industrial capitalists, like Henry Ford. You own a traditional factory for making cars. You have a huge facility, big enough to accommodate all the machinery and processes necessary to manufacture your automobiles. You have an enormous amount of capital invested in this factory and employ thousands of workers.

I come along and open a newer-fangled auto plant. I have robots and computer numerically controlled machines. My entire production process is computerized. I can build cars faster, cheaper, with less waste, and with significantly fewer employees. I still have a lot of capital sunk into setting up shop, but my superior efficiency eventually drives you out of business.

Now a new kid arrives on the block. He prints cars with a 3D printer. (This is already being done by the way, one such company is Divergent3D) This new technology puts me out of business.

Eventually 3D printers become ubiquitous, everybody’s got one, and a wide variety of auto designs are readily available in the public domain. The marginal cost of printing a new car is near zero. All previous capital investments sit idle and become worthless.

This is obviously a gross oversimplification (by this time the whole concept of “cars” may be obsolete for all I know), but it serves to illustrate the general idea.

There is a purely capitalist solution to all this, but it is not sustainable. It requires unlimited growth in productivity and population, as Thomas Picketty explains in his 2014 work, Capital in the Twenty-First Century:

Only permanent growth of productivity and population can compensate for the permanent addition of new units of capital, as the law β=s/g makes clear. Otherwise, capitalists do indeed dig their own grave: either they tear each other apart in a desperate attempt to combat the falling rate of profit… or they force labor to accept a smaller and smaller share of the national income, which ultimately leads to a proletarian revolution and a general expropriation. (p.288-9)

The end of the capitalist mode of production, the end of production for exchange value and the immiseration of traditional capital; these three effects portend the end of the capitalist system. Start thinking of what you’d like to see replace it.