by Simon Bond

In 1995, Jeremy Rifkin wrote a book titled The End of Work, in which he contended that worldwide unemployment would increase as information technology eliminated tens of millions of jobs in the manufacturing, agricultural and service sectors. He predicted devastating impact of automation on blue-collar, retail and wholesale employees. While a small elite of corporate managers and knowledge workers would reap the benefits of the high-tech world economy, the American middle class would continue to shrink and the workplace become ever more stressful.

And so it was so, and so it will be that as we move forward unemployment around the world will continue to rise and global GDP will continue to fall.

We have been writing about this until we are blue in the face, so here is some more.

Recently Rifkin wrote a book called The Third Industrial Revolution. I remember reading The End of Work then thinking and preparing for the future, and I am now almost done on The Third Industrial Revolution, all I can think is, here we go again, so be ready, choose your investments wisely because you ain’t seen nothing yet.

Markets are beginning to give way to networks, ownership is becoming less important than access, the pursuit of self-interest is being tempered by the pull of collaborative interests, and the traditional dream of rags to riches is being supplanted by a new dream of a sustainable quality of life.

The current debate among economists, business leaders, and public officials on what appears to be a new type of long-term economic stagnation emerging around the world is an indicator of the great transformation taking place as the economy shifts from exchange value in the marketplace to sharable value.

As the marginal cost of producing goods and services moves toward near zero in sector after sector, profits are narrowing and GDP is beginning to wane. And, with more goods and services becoming nearly free, fewer purchases are being made in the marketplace, again reducing GDP.

Less value is slowly but surely being placed on access over ownership of goods, with consumers preferring to pay only for the limited time they use a car, bicycle, toy, tool, or other item, which translates to less GDP. Just look at the recent success of Uber and Airbnb as examples.

Researchers are just beginning to experiment with a new way of storing data that could eventually drop the marginal cost to near zero. In January 2013 scientists at the European Bioinformatics Institute in Cambridge, England, announced a revolutionary new method of storing massive electronic data by embedding it in synthetic DNA.

Capital continues to become labour.

Between 2008 and 2012, while the Great Recession was bleeding workers, industry was piling on new software and innovations to boost productivity and keep profitable with smaller payrolls.

The effect of these efforts is striking.

Mark J. Perry, a University of Michigan economics professor and visiting scholar at the American Enterprise Institute, a conservative think tank based in Washington, D.C., ran the numbers. By the end of 2012, according to Perry, the US economy had made a complete recovery from the 2007–2009 recession, with a gross domestic output of $13.6 trillion (in 2005 dollars). That was 2.2 per cent higher, or $290 billion more real output, than in 2007, just before the recession, when the GDP was at $13.32 trillion.

Perry observes that, while real output was 2.2 per cent above the recession level in 2007, industry churned out the increase in goods and services with only 142.4 million workers in 2012 – or 3.84 million fewer workers than in 2007. Perry’s conclusion: “The Great Recession stimulated huge productivity and efficiency gains as companies shed marginal workers and learned how to do ‘more with less (fewer workers)."

In the US, between 1982 and 2002, steel production rose from 75 million tons to 120 million tons, while the number of steel workers declined from 289,000 to 74,000.13 American and European politicians, and the general public, blame blue collar job losses on the relocation of manufacturing to cheap labor markets like China.

The fact is that something more consequential has taken place. Between 1995 and 2002, 22 million manufacturing jobs were eliminated in the global economy while global production increased by more than 30 per cent worldwide.

The US lost 11 per cent of its manufacturing jobs to automation. Even China shed 16 million factory workers while increasing its productivity with IT and robotics, allowing it to produce more output, more cheaply, with fewer workers.

The Internet of Things is already boosting productivity to the point where the marginal cost of producing many goods and services is nearly zero, making them practically free. The result is corporate profits are beginning to dry up, property rights are weakening, and an economy based on scarcity is slowly giving way to an economy of abundance.