The Unseen Economic Power of Automation

The prices of commodities that have constant variations of excessive high value are subject to collapse and could become almost worthless, thus creating a hostile business climate. The goal of industrial manufacturing is to ensure a constant profitable price on the commodity that is being produced.

   David V MacCollum

Our early industrial leaders, such as Andrew Carnegie (1837-1919), who with his U.S. Steel Company, out-produced British dominance of steel manufacturing and was manufacturing one-fourth of our nation’s steel by 1900, thus achieving a leveling effect on the price of steel. John D. Rockefeller (1839-1937) was able to dramatically affect the price of oil, as he had control of 90% of the refineries by 1878. In 1881, Rockefeller organized the Standard Oil Trust, and within a year, had complete control on the price of all oil products in the U.S..   With the advent of the automobile industry, gasoline became a profitable prize, and in 1911, our Supreme Court ended the oil monopoly. In both the steel and oil industries, the intent was to stabilize and reduce the cost of steel and oil. It was found to be the ruthless business practices to gain control that made Carnegie and Rockefeller extremely wealthy.

During the anti-trust movement, the focus was on the evil of excessive profits. Overlooked, is the benefit of stabilization on the price of steel and oil commodities, which provided economic stability for all enterprises that depended on these products. Today, in the event of a recession, there appears to be minimal coordinated effort to cut production based on a number of reasons. Often the result creates a social impact to the labor force, which then becomes a recipe for bankruptcy as enterprise cannot survive manufacturing a product at a loss.

In the mid-1800’s, Charles Darwin (1809-1888) published his theory the natural selection On The Origin of Species. By this theory, one can conclude that the origin of species involved life forms that could best survive. It appears that the same concept applies to enterprise, but in a much accelerated time frame with the implication on  “If it cannot make a profit, the business soon fails.” Unfortunately, a welfare state does not appreciate the natural selection of profitable enterprise that needs a workforce with marketable skills.

In the 1950’s, a housing boom created a very unstable price of lumber. In the early Spring, the market price per board foot of lumber was usually three times the cost by mid-Summer. This fluctuation made it difficult for many sawmills to survive. In Southern Arizona, the price of copper has now risen to above $3.00 per pound, recovering from the recent recession when copper dropped from over $4.00 per pound down to less than $1.00 a pound. This price variation creates a very difficult economic climate for the copper mining industry. The unseen economic power of automation will soon stabilize the cost of copper. An automated open-pit copper mine, with driverless ore trucks and autonomous loading shovels combined with automated blasting is without labor and can work continuously 24 hours a day, 7 days a week. If the price of copper drops, the automated open-pit mine can slow down or stop production without laying off workers, as there are almost no workers in the open pit mine. With automation the price of copper can be stabilized because production can be controlled to ensure a profitable market cost.

There are many enterprises that provide commodities, products or services that do not have to rely on many employees. Soon to come are crewless cargo and container ships, driverless highway freight trucks and countless other manufacturers that can rely on automated technology that eliminates the need for a large workforce. As this transition gradually takes place over the next few decades, automation will require a new workforce of designers, assemblers and maintenance personnel. These skills earn higher pay than the manual labor they replace. The future looks bright, because automation that ensures for a stable market price will be creating a new professional workforce.

The unseen economic power of automation will not result in industrial monopolies such as what Carnegie and Rockefeller created. What appears to be happening is a powerful balanced economy will arise with great opportunity for innovation. The basis of this belief, one only needs to look at the economic engines that Microsoft and Apple created. Automation needs to be welcomed as a new investment source that provides a greater access to wealth for innovative people.

2 Comments on "The Unseen Economic Power of Automation"

  1. Albert Lannon | October 25, 2017 at 9:17 am |

    If robots replace people, where will the people earn the money to buy the products made by the robots? Unlimited automation seems to me to lead to an expansion of the welfare state. Or do we really think there will be enough MacDonald’s jobs to keep the economy going?

    • Albert, you raise a question with which I have grappled; in my day job, I do a great deal of process automation, and considering the broader scope to which we could apply automation begs the very same question.

      The reality is that automation does reduce menial and repetitive tasks and can eliminate lower-level jobs; but it also opens tremendous, unbounded opportunity for innovation: Workers willing to learn and create can advance, opening spaces for other workers to backfill, either directly opening opportunities for the workers who formerly performed those now-automated tasks, or by opening up higher-level positions that can elevate employees perhaps several layers down. Additionally, with automation stabilizing pricing in various markets, innovators can create new uses for the commodities now produced through automation and can open up new businesses and even new industries for those displaced staffers. Further, I firmly and wholeheartedly believe–and I have written this in the ADI before–that we can and should automate many manufacturing processes to bring costs down to the point that we can compete with many other nations to take back the factory jobs we’ve lost in decades past, and actually leverage automation to /increase/ employment in the US.

      From the Jacquard loom through Ford’s assembly line to the digital age, our society’s innovators have repeatedly automated away jobs that once took many, many people. And yet, we have survived, and even thrived. We have already proven that automation creates opportunity. And if you want to go to the extreme, the late researcher Hans Rosling pointed out that the automation of an electromechanical clothes washer could free women in third-world nations to read books for their own education when they would traditionally be doing the washing, allowing them to bring themselves out of poverty. In this case, as American society has proven, the rising tide floats all boats, and automation can make life better for the whole world, potentially while reducing the welfare state.

      I hope your chemo treatments are proceeding well, my friend.

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