Although inequality of income and wealth in America has been growing steadily for the past forty years, it was with the Wall Street crash of 2007-2008 that this disparity took on lurid, visible form with the contrasting fortunes of the winners and losers. On the winning side, with their big bonuses, were many Wall Streeters who themselves bore responsibility for the crash. On the losing side were victims of the crash on Main Street, burdened with high unemployment, crushing personal debt, falling real wages, and shrinking personal wealth propelled by housing foreclosures…
Unless soon reversed, these decades of income stagnation or decline for the majority threaten something fundamental to American identity that for more than two centuries has set the United States apart from its old European mother countries: the confidence of most Americans that through education and hard work, they can overcome the barriers of birth and inheritance and rise as far as their talents will take them. This confidence is draining away as the barriers of American class strengthen, shrinking the life prospects of what may now be a majority of Americans and including much of the middle class among the newly disadvantaged.
As its title suggests, this book will look at the role of information technology (IT) as a driver of this inequality. By making us dumber, smart machines also diminish our earning power. But the machines that do this are not the automating, stand-alone machine tools of the 1950s, or even the stand-alone mainframes of the 1960s and 1970s, but vast networks of computers joined by software systems and the Internet, with the power to manage the affairs of giant global corporations and to drill down and micromanage the work of their single employees or teams of employees. There now exist in the US economy of the new century these very powerful agents of industrialization, known as Computer Business Systems (CBSs), that bring the disciplines of industrialism to an economic space that extends far beyond the factories and construction sites of the industrial economy of the machine age: to wholesale and retail, financial services, secondary and higher education, health care, “customer relations management” and “human resource management (HRM),” public administration, corporate management at all levels save the highest, and even the fighting of America’s wars.
CBSs are being pushed by business academics, especially at the Massachusetts Institute of Technology (MIT), management consultants such as Accenture and Gartner, and IT companies such as SAP, IBM, and Oracle, and embraced by corporations for their efficiency. But they are not well understood beyond these specialist communities engaged in their creation, marketing, and servicing. These systems are today rather as black holes once were before black holes were fully discovered. Astrophysicists knew that there were things out there in the cosmos exerting a gigantic gravitational pull over everything that came into contact with them, but they did not yet know exactly what these things were. CBSs are the semidiscovered black holes of the contemporary economy.
One measure of their obscurity is that there is no generally accepted name for them. Some of the most influential economists doing work in the field call them Computer Business Systems, and I am following their example here. But they have also been known as Enterprise Systems and by several other names and activities closely associated with them at various stages of their history: Business Process Reengineering (BPR) in the early and midnineties, Enterprise Resource Planning (ERP) in the mid- and late nineties, and the Balanced Scorecard (BSC) throughout the 1990s and into the new century. Yet despite this obscurity and lack of a fixed identity, evidence occasionally surfaces showing how much the corporate sector relies on these systems and how heavily it has invested in them…
The human side of this new industrialism can easily get lost in the abstract, theoretical world of macroeconomics and management science. In the first machine age the working class occupied a world apart, tethered to factories and assembly lines and bearing the full rigors of industrialism. In the new machine age, the working class can be all of us. The new industrialism has pushed out from its old heartland in manufacturing to encompass much of the service economy, and it has also pushed upward in the occupational hierarchy to include much of the professional and administrative middle class: physicians as well as call-center agents; teachers, academics, and publishers as well as “associates” at Walmart and Amazon; bank loan officers and middle managers as well as fast food workers.
In the first machine age, the primordial conflict was not only about wages and benefits but also about the pace of work, the speed at which the automatic machine and the assembly line would run, and so the rate at which human as well as physical capital would be depleted. With the coming of the networked computer with monitoring software attached, industrial regimes of quantification, targeting, and control now pervade the white-collar world: how many patients, litigants, customers with complaints, students with theses, and future home owners with mortgage applications have been processed or billed per day or week, and how many should be processed or billed, because the digital white-collar line is subject to speedup no less than its factory counterpart?
White-collar professionals subject to relentless targeting and speedup have to wonder whether they, like shop-floor employees at Walmart and Amazon, are being worked and worked until they too become depleted as human resources (HR), victims of burnout, then “let go,” to be thrown onto the human slag heap just like the nineteenth-century proletarians of Émile Zola’s great novel about the coal miners of northern France, Germinal. In the first machine age, the relations between men and machines were on display in the operations of the factory floor. The abuses that took place were visible to the outside world, the raw material of radicalism and reform. In the new machine age, the workings of the white-collar line are hidden in the innards of servers and software systems. They are also cloaked in the mystique and prestige of science and high technology. They now need to be brought into the open.
This is the production world of IT, which leaves behind Steve Jobs’ lustrous and indulgent kingdom of iPods and iPads and opens up an austere, puritan republic in which the relationship between IT and its users is turned on its head. In the Steve Jobs world, the products of IT are our servants and we have the freedom to do what we want with them (though businesses, for their own purposes and profit, closely watch how we exercise this freedom). On the production side of IT, the relationship is transformed and the systems dominate. They enforce the rules that determine how work should be done and with a power and speed unthinkable in the predigital age. But although the systems enforce the rules, they do not make them; they have no will of their own. The rules are the work of a number of interested parties: the senior executives who know broadly what they want the rules to look like, the system providers such as IBM and SAP who supply products whose designs are close to what the executives want, and the corporations’ own in-house designers who can tweak the purchased products to account for local needs.
CBSs are amalgams of different technologies that are pulled together to perform highly complex tasks in the control and monitoring of businesses, including their employees. The technologies of the Internet are critical to CBSs because they provide the foundation for computer networks that can link the workstation of every employee or group of employees within an organization to that of every other, irrespective of location and status — from a chief executive officer (CEO) in New York to a group of claims processors in Bangalore, India…
The assembly line has been a dominant image of the machine age because the line and its workforce could be visited, watched, photographed, and even dramatized in the movies — notably by Chaplin in Modern Times (1936). But what are the visual manifestations of CBSs — a concrete blockhouse somewhere in New Jersey housing the huge servers needed to handle the gigantic quantities of information yielded by the systems, or employees staring at rows of flickering computer screens, receiving their instructions online and then keywording in their responses or, if working in call centers, speaking to customers on the telephone? This visual poverty elevates the importance of the trade literature on CBSs put out by their leading creators — SAP, IBM, and Oracle — as primary sources about what the systems are and how they work.
This book opens up the largely hidden world of CBSs and explores the ideas and practices of the corporations, consultants, and management theorists who sustain them. This is a missing piece of the economic jigsaw whose absence detracts significantly from our understanding of the US economy at a time when its growing inequalities of income, wealth, and power threaten its social and political well-being as nothing has since the Great Depression. There are explanations for this malaise that, on the face of it, have little or nothing to do with CBSs and the production side of IT. Among them are the displacement of much US manufacturing to the developing world; the shift of political power in favor of business, leveraged by business to skew the distribution of income and wealth in its interest; and the deterioration in US education at all levels that leaves a growing percentage of the labor force without the skills to hold down well-paying jobs in the “knowledge economy” or to compete with the tens of millions entering the global labor force, especially in East Asia.
But the “IT question” as defined here can both challenge and amplify these explanations. Can, for example, the overseas sourcing of manufacturing really be an adequate explanation for the US economic malaise when more than 80 percent of the US labor force is now employed in service industries, which for the most part are not in direct competition with the developing world and where the impact of white-collar industrialization has been especially severe? Then, turning to the US workplace itself, would the top management of US corporations have been so successful in skewing the distribution of corporate profits in their own favor if the workforce really had been empowered by information technology as “knowledge workers” in a “knowledge economy,” as management gurus such as Peter Drucker confidently predicted twenty years ago? And is improved education at the high school, vocational, or even college level really the golden key to a world of high-paying, secure employment if in fact Computer Business Systems are being used to marginalize employee knowledge and experience and where employee autonomy is under siege from ever more intrusive forms of monitoring and control?
The emerging relationship between technology and work in the US economy of the late twentieth and early twenty-first centuries suggests that the corporate sector is relying on information technology both to simplify and accelerate the processes of business output, and so increase the output of labor, and to deskill labor, diminish its role, and so weaken its earning power. The widening gap between the growth of labor’s output and its real earnings is the desired outcome of this regime. When the output of labor rises and its real earnings stagnate or decline, then, other things being equal, the cost of labor per unit of output will fall and profits will rise.
From a corporate perspective, this is a good outcome, and especially with the compensation of top management so frequently linked to the corporate stock price, which will tend to rise with profits. But there is an identity and equivalence of basic economics that this project overlooks. Producers are also consumers, and by denying -employee-producers the rewards of their increased productivity, the architects of the wages-productivity gap have also laid siege to the consumers’ republic and so undermined the US economy’s single most powerful engine of demand and growth. Consumers had been relying on debt to keep their consumption afloat in the face of stagnant real earnings, but this remedy, like the housing bubble itself, could not endure and indeed ended with the financial crisis of 2007-2008.
In explaining why the recovery has been so weak and why it is having to keep interest rates so low and for so long, the Federal Reserve has placed a heavy emphasis on the poor financial condition of consumers and their inability to relaunch the economy with their spending, constrained by high unemployment, zero income growth, lower housing wealth, and tight credit.What the Fed does not acknowledge is that the eclipse of consumers is simply the reverse side of their eclipse as producers and that this has taken place as part of an economy-wide business plan.
Excerpted from Mindless: Why Smarter Machines are Making Dumber Humans (New York: Basic Books, a member of the Perseus Books Group). © 2014 Simon Head. Used by permission.
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