‘Fools, Fools!’ shouted Benjamin, prancing around them and stamping the earth with his small hoofs. ‘Fools! Do you not see what is written on the side of the van?’
That gave the animals pause, and there was a hush. Muriel began to spell out the words. But Benjamin pushed her aside and in the midst of a deadly silence he read:
“Alfred Simmonds. Horse Slaughterer and Glue Boiler, Willingdon. Dealer in Hides and Bone Meal. Kennels supplied.” Do you not understand what that means? They are taking Boxer to the knacker’s!’
George Orwell, Animal Farm
But why did Napoleon, in George Orwell’s allegory of Animal Farm, send the horse Boxer to be killed and made into glue and dog food?
Napoleon was, of course, based on Joseph Stalin, and, being an unsentimental creature, he made the perfectly logical economic calculation that a weakened Boxer had come to cost more in feed than could be earned from his labour; ironically, this decision was true capitalism ‘red in tooth and claw’.
So how does this relate to the impact of technology on jobs and wages? Well, orthodox economists generally push back against the job destruction I outlined in Hiding from the Computers Part 1 by a) waving the theory of comparative advantage and b) looking at the historical wage record for unskilled workers since the industrial revolution.
For example, in an article in The New York Times entitled “Computers Jump to Head of the Class” earlier this week we see this:
Kazumasa Oguro, professor of economics at Hosei University in Tokyo, argues that smart machines should increase employment. “Most economists believe in the principle of comparative advantage,” he said. “Smart machines would help create 20 percent new white-collar jobs because they expand the economy. That’s comparative advantage.”
As an aside, the theory of comparative advantage is generally attributed to the English economist David Ricardo, but he was rather ambivalent about its impact on unskilled labour. He struggled with what he called ‘the machinery question’ and fluctuated from seeing technological advances benefiting all of society (divided into capitalists, land owners and workers) to a position whereby such advances could be detrimental to the working class. See, for example, here.
Comparative advantage is not as intuitive as absolute advantage. It is easy to see that if Napoleon is good at providing governance and security, and Boxer hard manual labour, then they should trade. Each has an absolute advantage in one area. The pig Napoleon is not as strong as the horse Boxer, but he is cleverer. However, as Boxer ages and becomes enfeebled, Napoleon becomes both cleverer and stronger than Boxer. Yet, at first, they should still keep trading despite Boxer’s weakened state. This is because Napoleon is still better at ruling than he is at working manually. Although he may be able to do manual work far better than the aged Boxer, this would require the opportunity cost of him giving up time ruling (and exploiting) the other animals on the farm.
Unfortunately for Boxer, there is a limit to this comparative advantage. Boxer requires a minimum calorific input to survive. As Boxer progresses toward senility, he saves Napoleon less and less time. At some point, a full day’s work by Boxer only saves, say, 10 minutes of Napoleon time. And that 10 minutes time spent ruling (exploiting) by Napoleon is worth less than Boxer’s feed—at that point, sorry Boxer: you are glue.
Too abstract for you? Well actually this is exactly what happened to Britain’s population of working horses early in the 20th century. The peak in horse numbers took place at 3.25 million in 1901 long after the industrial gathered pace. The economic historian Gregory Clark in his excellent book “A Farewell to Arms” explains what happened next: Continue reading