The adoption of new machinery, as part of technological progress, is a very controversial issue in economic analysis. Many analysts consider technology, the diffusion of technology, and technological advancements, to be very effective in promoting and attaining economic progress. Others consider machinery and new technologies to be major factors in reducing employment and the de-skilling of labor. These controversial views on machinery reflect the dual character of technology, which simultaneously creates and destroys labor positions.
Historically, the massive introduction of machinery in the production process took place with the advent of the capitalist economic system, and it was made possible by the subdivision and specialization of the labor process in the early stages of the capitalist mode of production. Adam Smith, in his famous example of the pin factory, showed very eloquently that the subdivision of the labor process into small consecutive tasks dramatically increases labor productivity and, more importantly, allows for the introduction of machines in the production process.
David Ricardo (1772–1823) was the first economist who discussed in detail the issue and consequences of technological progress in society. At first, he agreed with Smith that the mechanization of the production process is good for all social groups within an economy. The introduction of machinery increases productivity, lowers costs and, in competitive environments, lowers the prices of commodities. Eventually, all members of society benefit from the lowering of prices. Both the unemployment that is induced by technological change and the consequent substitution of capital for labor is only temporary, according to Say’s Law, which guarantees full employment in the economy.
Ricardo later revised his position, however, arguing that the introduction of machinery in the production process may not benefit the working class, since it may create conditions for permanent unemployment. This could occur if the expenditures on machines are not financed out of savings (new investments) but through the transformation of circulating to fixed capital (simple replacement of labor with capital). If the latter takes place, unemployment will rise and be permanent, and society will suffer. In both cases, however, Ricardo was supportive of a public policy favoring the introduction of machines into the production process. He argued that entrepreneurs will either search for higher profits by increasing productivity through technological progress, or they will invest in profitable projects abroad, rendering the domestic working class doomed to unemployment. Thus, the mechanization of the production process in an economy increases productivity and lowers per unit costs rendering the economy competitive in the international environment.
In Ricardo’s presentation of the question of machinery (as in James Mill’s), a certain confusion exists. At one point he argues that the substitution of capital for labor generates unemployment, but at the same time he stresses the benefits of genuine cost-reducing improvements in techniques. The theory that technological unemployment automatically generates compensatory adjustments was introduced by John Ramsay McCulloch in the 1820s. According to this approach, all technically displaced labor will necessarily be absorbed in the making of the machines themselves. This approach rests on the idea that, under perfect competition, innovations result in price reductions and an expansion of output. If demand is elastic, total receipts rise and the employer will increase his expenditures on either consumption or investment. If, however, demand is unresponsive to lower prices, the purchasing power in the economy still rises and consumers can acquire goods from other sectors, alleviating the increase in their sectoral demand. Either way, directly or indirectly, labor-saving machinery entails the expansion of output in an economy, which eventually causes the reabsorption of those displaced by machines.
Knut Wicksell (1851–1926), drawing upon compensation theory, argued that in analyzing the effect of labor displacement due to the introduction of machinery in the production process, the fact that unemployment creates feedback and domino effects in an economy should be considered. For instance, an increase in unemployment due to the displacement of labor will decrease wages and increase in profits. This rise in profits then brings about more investment and, by extension, more employment opportunities. In addition, the technological process introduced by machines increases productivity, lowers costs and prices, and eventually increases an economy’s demand and, most likely, employment.
An increase in labor productivity is important in the capitalist mode of production because the motive force of capitalism is the drive for profits. Quite simply, more profits can be attained if labor productivity rises. According to Marx, the inner nature of capital is its selfexpansion (accumulation), which imposes on individual capitals a fierce competition for higher profits and survival. An increase in labor productivity leads to per-unit cost reductions. This allows the entrepreneur to act in the competitive arena according to the following two pricing options: (1) if the price remains the same, the capitalist can attain a higher profit margin and, eventually, more profits; (2) if the price declines, the entrepreneur can drive his competitors out of the market, thus enjoying the benefits of a higher market share. Hence, rising labor productivity becomes an essential condition for capital’s survival. Labor productivity rises if the amount of value that a worker produces in a given time rises. In today’s economies, with the existing physical and legislative barriers (labor laws) to workers employment, an increase in surplus value (which translates into potential profits for the capitalist) can take place primarily through the introduction of new machinery.
The introduction of machinery into the labor process has changed the nature of the labor process itself. These changes include the intensification of work, the introduction of methods that further promote the division of labor, and the specialization and work rationalization that serve to simplify and standardize work so that it can be done in the least amount of time at the lowest cost to business. Technology is a particularly effective mode of getting workers to expend a greater amount of labor power while they are on the job. As a result, more output can be obtained by employing more capital and less labor. Prior to the 1960s, technology was applied primarily to industrial production and to manual work processes. These forms of mechanization reached their height in the automation of assembly lines and in “continuous-flow” processes, which raised industrial productivity enormously. The dominant form of new technology applied to work processes today is electronic technology, which allows a worker to operate several testing machines at the same time, thus serving exactly the same purpose as increasing labor productivity.
The introduction of machines in the production process has also changed the character of the labor process. Since the equipment makes all essential decisions, many skills are removed from the worker’s task, making the worker perform more repetitive functions at a more productive rate. Labor is in this way intensely divided and de-skilled. With the division of work and the mechanization of the production process, the real subsumption of labor to capital takes place. Once a new technology is finally rationalized and prepared for mass production, in the long run it will de-skill most workers. Hence, mechanization and de-skilling are the logical outcome of capital’s need to exploit living labor. However, there is no perfectly linear descent of skill levels of the labor force, because new technologies may also raise the skill level of certain groups of specialized laborers.
In the face of rapid technological change, workers have great difficulty in recognizing that changes in their jobs are caused by management’s desire for greater profits, and not by the machinery itself. The famous movement of Luddites at the beginning of the nineteenth century shows the impotence of the working class to realize the real cause of jobless economic progress. At that time, British workers were against the introduction of labor-saving machines, and in many cases they destroyed factories and machines. The fact is, however, that the historical tendency of capitalism is the growth of surplus labor (as a reserve army of unemployed). Moreover, the more skillful the labor, the more they will be unemployed, since the way capitalism introduces machinery in the production process encourages unskilled labor.
SEE ALSO Division of Labor; Labor, Surplus: Conventional Economics; Luddites; Machinery Question, The; Marx, Karl; Productivity; Relative Surplus Value; Ricardo, David; Say’s Law; Surplus Population; Unemployment
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Persefoni V. Tsaliki
ma·chin·er·y / məˈshēn(ə)rē/ • n. machines collectively: farm machinery. ∎ the components of a machine: the movement of the machinery. ∎ the organization or structure of something: the machinery of democracy. ∎ the means devised or available to do something: with the grievance machinery in place.