The Driverless Revolution

Last week I looked at Adair Turner’s paper on automation, in which he points out that the automation of all theoretically viable production processes is not some utopian fantasy, but could be as near as 50-100 years away. But I suggested that we only needed to move part way down this path for it to have apocalyptic social impact, and this week I’m going to demonstrate this by looking at a specific technology: driverless cars.

The technology already exists and various companies are already trialling their vehicles, although we may well be some way off having these cars on the road. This article provides a good introduction to the likely economic effects, although overplays how close we are to this technology. This article gives a more sceptical view on the likelihood of fully automated vehicles on our roads, but just 2 days ago this article described self-driving cars being tested on the streets of cities. This article also gives an upbeat perspective on driverless cars, but it is from the point of view of the car industry!

But the key here is not to think in terms of personal transport – even if the technological challenges can be overcome, the extra expense of purchasing a driverless car just to save yourself the effort of driving yourself around is likely to be highly prohibitive for decades. The revolution will be in professional driving – deliveries of goods, and taxis or Uber-style services.

The wage savings to companies will more than recoup the cost of the driverless cars. Driverless heavy goods vehicles are a particularly viable prospect: the journeys tend to be repetitive and simple; long-hauls will be quicker as there will be no need for the driver to rest; and most of all, they will be saving the cost of the driver. But the technology will also be attractive to Uber-style services in particular. And if this then drives down the cost of Uber, the increased demand will make such services even more economically viable. For all those who cannot drive for reasons of physical disability, old age, or just because they haven’t passed their test, cheaper taxi/Uber services could be life-changing.

But for all these savings and benefits, there will be a cost. The latest estimates I could find are that the USA has about 3.5 million truck drivers, 690,000 bus drivers, 300,000 taxi drivers and 750,000 Uber drivers. The UK has about 320,000 HGV drivers, and 360,000 taxi drivers in England alone. 5 million job losses in the USA and at least 1 million in the UK would have an impact way beyond the lives of the individuals concerned. Three posts ago I highlighted how the loss of an industry that is central to a region can have an impact that lasts for decades. In this case, you are looking at job losses spread throughout the whole country, on a scale that would have a significant impact on the national economy. This is the point that all the articles linked above, apart from the first, miss.

If it could be so disastrous, why would it go ahead? Because the companies implementing this will benefit – they won’t care about national impact, they will only be looking at at their own profits. We will benefit from lower prices for a time, but then the economy will slowdown as the loss of income for so many people impacts on consumer demand. Meanwhile, public expenditure will have to cover not just increased benefit costs, but the cost of increased services that rising poverty always requires, while suffering the fall in income tax revenue. (Mainstream economics argues that the job losses won’t cause a drop in demand, because the savings made become income for somebody else – I refuted these arguments 4 posts ago.)

But above all else, consider the political effects of such a widespread loss of traditional blue-collar jobs. Decades of regional decline in traditional manufacturing industries have caused profound political shifts, manifest in the phenomena of Trump and Brexit. Will these job losses finally enable people to see the problems with free market fundamentalism? Or will it leave them ripe for exploitation by the latest generation of populist demagogues?

We don’t want to miss out on all the social benefits that driverless transport can bring. And we all want to benefit from the savings possible with reduced labour. But we don’t want this to be at the expense of impoverishing millions of people worldwide, with all the associated social dislocation.

How do we find a way to spread the benefits of increased income productivity gains throughout society, rather than seeing them flow to the richest in society? The free market is not the answer. The rise of neoliberalism in the last 40 years has seen a corresponding exponential growth in the gap between the super-rich and the rest of us, as highlighted in this post. There needs to be a new response, and the seeds of this can be found by combining several ideas already explored in the blog, which I will outline next week.

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