Paul Krugman: Robots and Robber Barons

I have been arguing for some time now "that we have paid too little attention to the growing economic and political power of our largest firms," and that this is a factor in the "maldistribution" of income, so it's nice to see this issue get more attention:

Robots and Robber Barons, by Paul Krugman, Commentary, NY Times: The American economy is still, by most measures, deeply depressed. But corporate profits are at a record high. How is that possible? It’s simple:... profits have been rising at the expense of workers in general, including workers with the skills that were supposed to lead to success in today’s economy.

Why is this happening? As best as I can tell, there are two plausible explanations, both of which could be true to some extent. One is that technology has taken a turn that places labor at a disadvantage; the other is that we’re looking at the effects of a sharp increase in monopoly power. Think of these two stories as emphasizing robots on one side, robber barons on the other.

About the robots: there’s no question that in some high-profile industries, technology is displacing workers of all, or almost all, kinds. ... What’s striking ... is that many of the jobs being displaced are high-skill and high-wage; the downside of technology isn’t limited to menial workers. ...

What about robber barons? We don’t talk much about monopoly power these days; antitrust enforcement largely collapsed during the Reagan years and has never really recovered. Yet Barry Lynn and Phillip Longman of the New America Foundation argue, persuasively in my view, that increasing business concentration could be an important factor in stagnating demand for labor, as corporations use their growing monopoly power to raise prices without passing the gains on to their employees.

I don’t know how much of the devaluation of labor either technology or monopoly explains, in part because there has been so little discussion of what’s going on. I think it’s fair to say that the shift of income from labor to capital has not yet made it into our national discourse.

Yet that shift is happening — and it has major implications. For example, there is a big, lavishly financed push to reduce corporate tax rates; is this really what we want to be doing at a time when profits are surging at workers’ expense? Or what about the push to reduce or eliminate inheritance taxes; if we’re moving back to a world in which financial capital, not skill or education, determines income, do we really want to make it even easier to inherit wealth?

As I said, this is a discussion that has barely begun — but it’s time to get started, before the robots and the robber barons turn our society into something unrecognizable.