Civitas Review

Obama's ATM Comments Expose Economic Ignorance

none
Jun
17

It is amazing how old economic fallacies continue to persist, even after hundreds of years of debunking. The latest case in point is President Obama's comments blaming the economy's persistent high unemployment on "structural issues" involving businesses realizing productivity gains by substituting machinery and technology for manual labor.

Economist Sheldon Richman exposes the ignorance of these comments in this excellent piece:

It is astounding to hear Obama invoke the old argument that technological advances create permanent idleness among workers. I haven’t heard that one in years. These days foreigners get the blame for lost jobs. Obama has dredged up a real oldie but not-so-goodie. As Henry Hazlitt wrote long ago, “Destroyed a thousand times, [the fallacy] has risen a thousand times out of its own ashes as hardy and vigorous as ever.”

More (and better) work can be done by fewer people because of computers and other technological wonders. Yet the (previous) declines in farm and manufacturing jobs did not create permanent mass unemployment over the long haul. Why not? Because there was other work to do. Our desire for goods and services (including leisure services) is essentially limitless. New jobs arose to absorb the workforce that had become superfluous in farming and manufacturing. And since the combination of rising productivity and competition (despite government constraints) lowered prices, consumers had more money to buy the things those new jobs produced. Living standards rose. What’s more, because of growing consumer demand, employment increased even in existing industries that adopted the new machines.

To the extent that firms are seeking to replace manpower with technology, however, Richman points out that Obama's policies themselves shoulder much of the blame.

Where companies can have the same work done by using machines or hiring people, the government in various ways has tipped the scales toward the machine. Obamacare is a prime example. Anything that raises the cost of hiring makes the case for buying equipment instead (or outsourcing) more attractive.

Change is constant in our economy. A big part of that change involves technology and innovation to increase productivity. Increased productivity is what raises our standard of living over time.

But Obama seems to see this progress as a problem. His adherence to long-ago refuted economic fallacies further exposes his economic ignorance.