Douglas Carswell

18 JAN 2016

No, machines don't create mass unemployment

The Spectator has resurrected the old myth about technological unemployment. Millions of manual jobs will soon be done by robots, it warns; this is a 'potential catastrophe'! Except it's not true. Mechanisation didn't cause mass unemployment in the industrial revolution, and it won't today.

In 19th-century Britain, many artisanal industries became mechanised – but that didn't mean people had no work. On the contrary, mechanisation generated so many jobs that employment kept up with an unprecedented explosion in population as Britain broke the Malthusian trap. It made basic goods like clothes and fuel much cheaper to produce and transport, and therefore much cheaper to buy. It allowed millions of people to escape poverty and earn a stable wage.

Yes, there were losers as well as winners. Weavers, for example, didn't gain from the mechanisation of the textile industry. In fact, textile workers formed a movement – the Luddites – to protest against the rise of the machines, by smashing them up. But the employment losses suffered by a small group were outstripped by the enormous employment gains for a much larger one – and the wider economic gains for consumers.

The key point is this: mechanisation creates jobs because it creates demand. By cutting the cost of production, mechanisation means people have more money to spend. It stimulates consumption and demand. More demand calls for more supply – which means more people end up being employed in the production process.

Arguing that robots can replace all human jobs completely misses the point. It is Bastiat's 'broken window' fallacy: yes, industry may radically change so that people won't be doing some jobs in 50 years' time that they do today; but what about the wider effects we're not looking at?

If we actually get to a point where people don't need to work for a living, that won't create destitution; it will open up brand new economic activity. It will create enormous demand. And that will allow people to exchange their skill and labour in entirely new ways.

The Industrial Revolution made Britain the greatest country in the world. We shouldn't be afraid of harnessing that spirit today. Quite the opposite: market-led innovation will make Britain a world-leader again!

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