Technology and capitalism's existential crisis
Technology companies and mineral extraction have one thing in common: They have the capacity to make huge profits without a massive workforce. Take Exxon Mobil, with profits of well over US$40 billion, but a headcount of less than 80,000 people. It needs just 1,700 people to create a billion-dollar profit. Apple has a similar profit with a few less people.
Look through the records of many big companies, and you'll find that a pattern quickly emerges. Resource and technology companies seem to make their money without many people. At the other end of the table are the manufacturing businesses; Volkswagen needs more than 19,000 people to create its billion dollars, 11 times more than Apple. It would have needed even more employees had technology not stepped in to drive efficiencies.
Of course, headcount is a reflection of how much you outsource. Apple has hired just 73,000 people, whereas Samsung employs 369,000. They both make devices, but Apple has shipped the work overseas, where it's cheaper. Samsung employs the lower-cost workers directly — their average wage is less than US$20,000.
So what ultimately happens when technology generates wealth without many jobs? Do all those extra people create other technology jobs to create yet more wealth? Or do we just see a rising divide between the haves and have-nots?
Economist Steve Keen, author of Debunking Economics, describes it as capitalism's existential crisis. To date, our economic system has been based on needing workers to produce output and hence profit. He said, "if 3D printing and the like reduce the labour input needed to almost zero, that nexus will be broken. If we don't find another means to distribute income, then it will be a return to feudalism without peasants, with massive social conflict".
Even before machines can create anything at all — his reference to 3D printing — we're seeing massive upheaval. The drop in demand for people in manufacturing is now spreading to retail as we start to shop online, for example. It will hit every industry with similar catastrophic impacts on employment.
Sure, technology companies are growing and recruiting more: Microsoft has come close to doubling its workforce in the last nine years, but it still employs less than 100,000 people. Most of these companies are growing their profits at a much faster rate than they are recruiting at.
Besides, in an economy like Australia, if every employable person could generate wealth at the same rate as Apple, then we'd rake in US$7 trillion — five times Australia's gross domestic product (GDP). Everyone would be five times wealthier, but our houses would probably be five times more expensive.
On the positive side, there's plenty of room for upsides. Perhaps technology will create opportunities for everyone. But perhaps Steve Keen is right — capitalism needs a rethink.
As to what we do with all these extra people, the answer could be for them to join the army. The US Department of Defense is the world's biggest employer, with 3.2 million people. Next comes the People's Liberation Army, which, with 2.3 million employees, is just a bit bigger than Walmart (2.1 million).
Our destiny seems to be that mankind will fight wars, leaving the money making to machines.