- Email: [email protected]
A model of new technology and jobs
A MODEL OF NEW TECHNOLOGY ANDJOBS Michael
Hopkins
and Rolph Van Der Hoeven
A simple closed system, one product mathematical model of an economy is described; its aim is to help discussions of the effects of technological change on employment and related issues like income distribution. The main conclusion of the mathematical exercise based on the model is that an introduction of new technologies, in order to have positive effects on should take place in a situation of supplyemployment, demand equilibrium, or even in a situation of some excess demand. The policy implication of this is that governments must take some action since if they are unwise enough to follow laissez-faire policies the prospects of a divided society with considerable levels of unemployment is likely. HAS BEEN much speculation concerning the impact of the new technologies (in particular, microprocessors) and their negative effects on employment. To date, much intellectual effort has been based on intelligent guess work based on a sectoral approach, and has only considered direct effects on employment. For example, a particular sector, eg secretarial services, is considered and the impact of the “chip’‘-in this case, a word processor-on employment is examined. This approach shows that the increased efficiency of the technology compared to the ordinary typewriter leads to a reduction in employment in that particular sector. To properly appreciate the impact of these technologies, one needs to take a multisectoral approach, to look at both supply and demand aspects of the technolon, and to examine indirect effects. For example, in the case of secretarial services, not only should the introduction of microprocessors and their effect on reducing the demand for secretaries be considered, but also the effect on ef%iency and improved output which could free resources for other investment opportunities which could provide jobs. Furthermore, these word processors have to be produced somewhere, ie there are both demand and supply effects. To date, the debate has concentrated on the demand for labour and the supply of products. Hence it has been argued that there will be a reduced demand for labour for that sector, but not an increase in employment in other sectors or an equivalent reduction in the effective demand for goods over their supply. Thus it ignores the composition of the demand for labour, the wage share and distribution, the profit share and the distribution of the surplus, the effects on consumption and, in turn, on growth amongst other things. THERE
Both
authors
are
CH- 12 11, Geneva
with the Employment and Development Department, International Labour 22, Switzerland. The view expressed here are not necessarily thosr of the ILO.
FUTURES December 1981
0016-3287/81/060483-6!$02.000
office.
1981 IPC Business Press
484
A model of new technology and jobs
What we suggest here is a model-a rather simple macro economic modeland use it as a framework upon which to base a discussion on the negative and positive effects of the new technology. We use a model because we feel that this would focus our discussion on the most important aspects of the debate, and would encourage us not to forget both supply and demand aspects of the equation. By supply we mean both the supply of products or the factors of production, such as the supply of labour and capital. Likewise for demand.
Description of the model The model (given mathematically in Table 1) represents a closed one sector economy, ie imports and exports are ignored, and only one good is produced. It is a Keynesian model where quantities adjust to meet shortfalls in demand or supply. There are no price effects. It considers only two types of labour: those jobs that are likely to increase in number because of the introduction of new technologies, and those likely to decrease because of the introduction of new technologies. The former jobs are likely to be concerned mainly with software services, technical services, and highly skilled man or womanpower. Those latter jobs are unskilled jobs such as machine assembly and parts of the service sector. There, even skilled jobs are likely to disappear, for example, secretaries, bank clerks, etc. Equation 1 is a simple production function relating investment (by means of a coefficient) to increases in output. Investment can be auCgmented by technology as expressed by I’. Equation 2 relates investment both to the output of the previous period and to excess supply or demand on the product market. Equation 3 relates consumption to total output. Consumption can increase or decrease as a proportion of output, depending on the distribution of income. This proportion represents, of course, aggregate behaviour and depends on (amongst other things) the outcome ofvarious policies that could be introduced by government.1 Equation 4 is an identity, and relates total output to consumption and investment. Total output is seen here from the demand side of the economy; total consumption and investment together form the demand for products on the product market. Equation 5 links the demand for labour to total output, and we define two classes of labour: one class (rich) whose jobs are likely to increase in number because of changes in the pattern of demand for labour through the introduction of the new technolom, and the other (poor) for whom job numbers decrease. Equation 6 gives three technology equations, and illustrates that new technology can reduce the demand for labour through affecting the labour coefficients P (though differently for the two classes of labour), and increase the capacity to supply products through the investment coefficient I’. In Equation 7, labour supply is assumed to grow at the same rate as population. It could of cause be made to grow faster if more women enter the labour force, simply by adjusting the coefficient. Equation 8 gives the exogenous population growth rate, and Equation 9 determines unemploymentthe difference between the labour supply of Equation 7 and labour demand of Equation 5. The definition ofrich and poor is not so much in terms ofincome as in terms of those labour classes which are likely to lose or to gain from the FUTURES December 1981
A model of new technology and jobs
TABLE 1. THE EQUATIONS
485
AND LIST OF VARIABLES
Equations
(1) (2) (3)
Production:
xt = I-/t
Investment: donsumption
It = f’Wt-1, St-l) Ct = A Xt_1
(4)
Demand:
xt = Ct +
(5)
Labour demand:
(6)
Technology:
Qr = fl @)&J
(7)
Labour supply:
(8)
Population:
Ls.t = m (1 + #No
Nt.=
(9)
Unemployment:
ut = L,,t-L;,&
(10)
Disaggregation of consumption:
A = f”‘(G)
(11)
Surplus capacity:
St = Xt’
(12)
Income distribution:
It
(6 X{if excess demand is prevailing, ie St< 0) = f-2”(h), I- = f3”‘(k)
xt
Symbols
xt xt ‘t
supply of products at time t
Ct
total consumption
LR DJ LP DJ LSJ 4 Ut
labour demand at time t for rich class of labour
demand for products investment at time t
labour demand at time t for poor class of labour labour supply population unemployment
CR
consumption of households where the majority of jobs will diminish
CP S G
consumption of households where the majority of jobs will increase surplus capacity Gini coefficient of income distribution
U,P
exogenous constant coefficients
f’f”f”‘f”” I
I
I
functions
l-
capital-augmenting technology
A
proportion of output consumed
Qr.QD
labour coefficients for rich and poor classes
introduction of new technologies. Consequently, Equation 10 indicates that the aggregate consumption coefficient may differ because of different consumption propensities of the rich and poor class of workers. Equation 11 indicates the surplus capacity (which could be negative) in the economy created firstly by the production function in Equation 1, and the demand for products as described in Equation 4. Equation 12 describes income distribution in terms of the difference of employment shares between those affected and those not affected by change in the new technology. The function of the model is not to give a complete description ofthe economy or to track behaviour over time. The equations are used simply as a basis for discussions, and to show major inter-relationships.
Discussion Comparing two equilibrium points in the model allows us to examine the effect of the introduction of a new technoloo. First, we examine the effect of technological change on the aggregate demand for labour,? and second, on the distribution of income.
Effect on aggregate labour demand Introducing a new technology gives two main effects in Equation 6: on the incremented capital output ratio I?, and on the labour coeffcients lr and lp. From Equation 5, aggregate labour demand Lg can be expressed as follows:
LD=LDR+LDP=(L,+~~)x
(a)
Assuming that there is no excess supply or demand (St = Xl’ - Xt = 0) by successful government management, and substituting rIt for X t; and hence Xt, into Equation (a) gives: LD = (lr + 9) I- . I
@I
Differentiating totally Equation (b) with respect to h, in order to obtain the elhect of the expansion of the new technology (h) on total demand for labour (L), and hence employment, gives: ig
=
Re-arranging
3Lglk%>O,
(2 +f&r.z+(lr+ip)(~ +;gq Equation (c) shows that aggregate if and only if,
(cl
labour demand increases,
ie
Cd) The inequalities in Equation (d) state that, with an expansion in the new technology (ah>O)> the aggregate demand for labour will increase if the increase in the labour demand coefficient associated with the ‘rich’ is greater than the decrease in the labour demand coefficient associated with the ‘poor’, minus the change in the total demand for labour associated with a giv,en percentage increase in output (or capacity) induced by the expansion ofthe new technology. Clearly, this leads to two, rather obvious, statements: that the total demand for labour can increase if: labour demand for the rich is greater than the labour loss for the poor, ie (3,Bh) > (alplC3h). Th’ is is, of course, a solution which follows from our definition of rich and poor. However, it is most unlikely tht such a change in the labour coeflicients will take place. The interesting case is that in which labour demand for the rich is smaller than the labour loss for the poor, ie (&/ah) < (alp/ah). c reation of extra employment in this case depends on the second term of the right hand side of the inequality, Equation (d).
This
condition
states that the influence
of technology
on productivity
and on
FUTURES December
19:l
A model oJnew technology and jobs
487
the increase in investment needs to be large enough to offset the loss in demand for labour caused by a relatively large decline of lr in relation to an increase of 9. An increase in productivity as expressed by an increase in IYor a decrease of the ICOR is certainly to be expected from new technologies. The crucial aspect is therefore the term (al/ah), viz the effect on investment. In Equation 2 in Table 1, we have not made investment dependent on changes in technology. The variables which do influence I in Equation 6 are both logged, and are thus predetermined in the present analysis. Thus, in our model a (al/ah) = 0. There is also no a priori reason to expect that investment will increase because of new technologies. It is more likely that investment will increase because ofgrowing expectations based upon past experiences, or because of perceptions of entrepreneurs (“animal spirits”, in the words ofJoan Robinson). At this stage, it is of interest to re-analyse the statement made at the beginningthat “the economy is in balance, and there is no excess supply or demand on the product market”. Excess demand would increase investment, and hence production and employment at a later period. 147th excess supply, production falls below capacity and investment will decrease, with the consequential effects on employment and future consumption. The main conclusion is thus that an introduction of new technologies, in order to have positive effects on employment, should take place in a situation of supply-demand equilibrium, or even in a situation of some excess demand. The question is, therefore, which elements of final demand would have to take up this role: investment, private consumption, government consumption, or exports? Putting the burden on investment alone will, in combination with new technologies, certainly lead to excess supply. Necessary impulses, therefore, also have to come from private and government consumption.’ Consumption and income distribution How will new technologies prime effect will be, of course, at times to the benefit ofother that those people who belong because of new technologies government intervention, it is
affect consumption and income distribution? A the displacement of certain sectors of labour ($), sectors oflabour (I,). It is furthermore quite likely to that part of the labour force which is expanded will see their income increasing. N’ithout any thus likely that income distribution will worsen.
If (%/ah) > 0 and (atplah) > 0, and it is unlikely that the poor workers can be transformed into the rich class through retraining, and/or assuming there is not enough growth in the economy SO that (al,/ah)> (a$/&) and ax/ah is small, then unemployment is likely to rise. This can be shown by substituting Equations 8 and 5 into Equation 9, and differentiating with respect to h. Assuming population growth is independent of technological change, we have:
au =-[lr+ ah
-
lp]g -($ +3)X*
and (aUtl&) > 0 if the above conditions hold. How would such a change in income distribution affect consumption? In Equation 10, we have postulated such a changeto the effect that a change in FUTURES December 1981
488
A model of nezc technology and jobs
the equality index is affecting the overall propensity to consume (A). As we postulated earlier, a decline or a relative decline in consumption will probably affect growth. Of course, some of the fall-back in consumption could be picked up by an increase in productive investment. However, with an expected decline in consumption, people will be less willing to invest, and part of the foregone consumption could be very well spent on speculative investment. Conclusion The model has been elaborated with the intention of helping those examining the impacts of new technologies on employment to, at least, not ignore what economic theory can offer them. An extension to an empirical application of this model is, theoretically at least, straightforward. The introduction of new technologies can have positive or negative effects, depending on domestic policy. If new technology is introduced and there is government intervention, and this revenue is distributed to those people who are unemployed or poorly paid, then the economy could grow, the distribution of income could remain equal-yet there would still be unemployment. The choice is then for those who are unemployed to decide what to do with their increased time-assuming that the money they will get for unemployment benefits and so on will be sufficient for them to have alternative choices in using their leisure. On the other hand, if there is not substantial government intervention, then the economy could enter into a depression and face a substantial period of unemployment, possibly even leading to a dualistic economy of the type normally found in developing countries. On the other hand, preventing the introduction of new technologies could be equally fatal. In the short term, such a strategy could protect jobs. Eventually, this would make the competitive position of exporting industries rather poor, with the possibility that export opportunities would be lost (to competitors), eventually leading to reduced growth. Associated with this would be the need for consumers to pay more for domestically produced goods than for those produced on the world market. Because of the pervasiveness of the new microprocessor technology (see Radaq), it is clear that government will be forced to take some action; if they are unwise enough to follow laissez-faire policies (this itself being an intervention, allowing ‘free’ market conditions to exist), the prospects of a divided society with considerable levels of unemployment seem likely. Notes and References
I. For example,
government could decide to transfer incomes from highly paid and productive employment. to those not so fortunate or help them to retrain etc. 2. fVe are grateful to D.T. Nguven of Lancaster University, UK, for suggesting this approach. 3. Also from exports. In view of the uncertainty of export markets, exports also could stimulate part of the final demand only in exceptional cases where an aggressive export policy is followed, combined with suppressing costs and especially wage costs at home. Exports could be a leading factor in the increase of final demand. For simplicity, we have left the external sector out of the model. 4. J. Rada, The Impact of Micro-electronics (Geneva, ILO. 1980).
FUTURES December1981
Hopkins
and Rolph Van Der Hoeven
A simple closed system, one product mathematical model of an economy is described; its aim is to help discussions of the effects of technological change on employment and related issues like income distribution. The main conclusion of the mathematical exercise based on the model is that an introduction of new technologies, in order to have positive effects on should take place in a situation of supplyemployment, demand equilibrium, or even in a situation of some excess demand. The policy implication of this is that governments must take some action since if they are unwise enough to follow laissez-faire policies the prospects of a divided society with considerable levels of unemployment is likely. HAS BEEN much speculation concerning the impact of the new technologies (in particular, microprocessors) and their negative effects on employment. To date, much intellectual effort has been based on intelligent guess work based on a sectoral approach, and has only considered direct effects on employment. For example, a particular sector, eg secretarial services, is considered and the impact of the “chip’‘-in this case, a word processor-on employment is examined. This approach shows that the increased efficiency of the technology compared to the ordinary typewriter leads to a reduction in employment in that particular sector. To properly appreciate the impact of these technologies, one needs to take a multisectoral approach, to look at both supply and demand aspects of the technolon, and to examine indirect effects. For example, in the case of secretarial services, not only should the introduction of microprocessors and their effect on reducing the demand for secretaries be considered, but also the effect on ef%iency and improved output which could free resources for other investment opportunities which could provide jobs. Furthermore, these word processors have to be produced somewhere, ie there are both demand and supply effects. To date, the debate has concentrated on the demand for labour and the supply of products. Hence it has been argued that there will be a reduced demand for labour for that sector, but not an increase in employment in other sectors or an equivalent reduction in the effective demand for goods over their supply. Thus it ignores the composition of the demand for labour, the wage share and distribution, the profit share and the distribution of the surplus, the effects on consumption and, in turn, on growth amongst other things. THERE
Both
authors
are
CH- 12 11, Geneva
with the Employment and Development Department, International Labour 22, Switzerland. The view expressed here are not necessarily thosr of the ILO.
FUTURES December 1981
0016-3287/81/060483-6!$02.000
office.
1981 IPC Business Press
484
A model of new technology and jobs
What we suggest here is a model-a rather simple macro economic modeland use it as a framework upon which to base a discussion on the negative and positive effects of the new technology. We use a model because we feel that this would focus our discussion on the most important aspects of the debate, and would encourage us not to forget both supply and demand aspects of the equation. By supply we mean both the supply of products or the factors of production, such as the supply of labour and capital. Likewise for demand.
Description of the model The model (given mathematically in Table 1) represents a closed one sector economy, ie imports and exports are ignored, and only one good is produced. It is a Keynesian model where quantities adjust to meet shortfalls in demand or supply. There are no price effects. It considers only two types of labour: those jobs that are likely to increase in number because of the introduction of new technologies, and those likely to decrease because of the introduction of new technologies. The former jobs are likely to be concerned mainly with software services, technical services, and highly skilled man or womanpower. Those latter jobs are unskilled jobs such as machine assembly and parts of the service sector. There, even skilled jobs are likely to disappear, for example, secretaries, bank clerks, etc. Equation 1 is a simple production function relating investment (by means of a coefficient) to increases in output. Investment can be auCgmented by technology as expressed by I’. Equation 2 relates investment both to the output of the previous period and to excess supply or demand on the product market. Equation 3 relates consumption to total output. Consumption can increase or decrease as a proportion of output, depending on the distribution of income. This proportion represents, of course, aggregate behaviour and depends on (amongst other things) the outcome ofvarious policies that could be introduced by government.1 Equation 4 is an identity, and relates total output to consumption and investment. Total output is seen here from the demand side of the economy; total consumption and investment together form the demand for products on the product market. Equation 5 links the demand for labour to total output, and we define two classes of labour: one class (rich) whose jobs are likely to increase in number because of changes in the pattern of demand for labour through the introduction of the new technolom, and the other (poor) for whom job numbers decrease. Equation 6 gives three technology equations, and illustrates that new technology can reduce the demand for labour through affecting the labour coefficients P (though differently for the two classes of labour), and increase the capacity to supply products through the investment coefficient I’. In Equation 7, labour supply is assumed to grow at the same rate as population. It could of cause be made to grow faster if more women enter the labour force, simply by adjusting the coefficient. Equation 8 gives the exogenous population growth rate, and Equation 9 determines unemploymentthe difference between the labour supply of Equation 7 and labour demand of Equation 5. The definition ofrich and poor is not so much in terms ofincome as in terms of those labour classes which are likely to lose or to gain from the FUTURES December 1981
A model of new technology and jobs
TABLE 1. THE EQUATIONS
485
AND LIST OF VARIABLES
Equations
(1) (2) (3)
Production:
xt = I-/t
Investment: donsumption
It = f’Wt-1, St-l) Ct = A Xt_1
(4)
Demand:
xt = Ct +
(5)
Labour demand:
(6)
Technology:
Qr = fl @)&J
(7)
Labour supply:
(8)
Population:
Ls.t = m (1 + #No
Nt.=
(9)
Unemployment:
ut = L,,t-L;,&
(10)
Disaggregation of consumption:
A = f”‘(G)
(11)
Surplus capacity:
St = Xt’
(12)
Income distribution:
It
(6 X{if excess demand is prevailing, ie St< 0) = f-2”(h), I- = f3”‘(k)
xt
Symbols
xt xt ‘t
supply of products at time t
Ct
total consumption
LR DJ LP DJ LSJ 4 Ut
labour demand at time t for rich class of labour
demand for products investment at time t
labour demand at time t for poor class of labour labour supply population unemployment
CR
consumption of households where the majority of jobs will diminish
CP S G
consumption of households where the majority of jobs will increase surplus capacity Gini coefficient of income distribution
U,P
exogenous constant coefficients
f’f”f”‘f”” I
I
I
functions
l-
capital-augmenting technology
A
proportion of output consumed
Qr.QD
labour coefficients for rich and poor classes
introduction of new technologies. Consequently, Equation 10 indicates that the aggregate consumption coefficient may differ because of different consumption propensities of the rich and poor class of workers. Equation 11 indicates the surplus capacity (which could be negative) in the economy created firstly by the production function in Equation 1, and the demand for products as described in Equation 4. Equation 12 describes income distribution in terms of the difference of employment shares between those affected and those not affected by change in the new technology. The function of the model is not to give a complete description ofthe economy or to track behaviour over time. The equations are used simply as a basis for discussions, and to show major inter-relationships.
Discussion Comparing two equilibrium points in the model allows us to examine the effect of the introduction of a new technoloo. First, we examine the effect of technological change on the aggregate demand for labour,? and second, on the distribution of income.
Effect on aggregate labour demand Introducing a new technology gives two main effects in Equation 6: on the incremented capital output ratio I?, and on the labour coeffcients lr and lp. From Equation 5, aggregate labour demand Lg can be expressed as follows:
LD=LDR+LDP=(L,+~~)x
(a)
Assuming that there is no excess supply or demand (St = Xl’ - Xt = 0) by successful government management, and substituting rIt for X t; and hence Xt, into Equation (a) gives: LD = (lr + 9) I- . I
@I
Differentiating totally Equation (b) with respect to h, in order to obtain the elhect of the expansion of the new technology (h) on total demand for labour (L), and hence employment, gives: ig
=
Re-arranging
3Lglk%>O,
(2 +f&r.z+(lr+ip)(~ +;gq Equation (c) shows that aggregate if and only if,
(cl
labour demand increases,
ie
Cd) The inequalities in Equation (d) state that, with an expansion in the new technology (ah>O)> the aggregate demand for labour will increase if the increase in the labour demand coefficient associated with the ‘rich’ is greater than the decrease in the labour demand coefficient associated with the ‘poor’, minus the change in the total demand for labour associated with a giv,en percentage increase in output (or capacity) induced by the expansion ofthe new technology. Clearly, this leads to two, rather obvious, statements: that the total demand for labour can increase if: labour demand for the rich is greater than the labour loss for the poor, ie (3,Bh) > (alplC3h). Th’ is is, of course, a solution which follows from our definition of rich and poor. However, it is most unlikely tht such a change in the labour coeflicients will take place. The interesting case is that in which labour demand for the rich is smaller than the labour loss for the poor, ie (&/ah) < (alp/ah). c reation of extra employment in this case depends on the second term of the right hand side of the inequality, Equation (d).
This
condition
states that the influence
of technology
on productivity
and on
FUTURES December
19:l
A model oJnew technology and jobs
487
the increase in investment needs to be large enough to offset the loss in demand for labour caused by a relatively large decline of lr in relation to an increase of 9. An increase in productivity as expressed by an increase in IYor a decrease of the ICOR is certainly to be expected from new technologies. The crucial aspect is therefore the term (al/ah), viz the effect on investment. In Equation 2 in Table 1, we have not made investment dependent on changes in technology. The variables which do influence I in Equation 6 are both logged, and are thus predetermined in the present analysis. Thus, in our model a (al/ah) = 0. There is also no a priori reason to expect that investment will increase because of new technologies. It is more likely that investment will increase because ofgrowing expectations based upon past experiences, or because of perceptions of entrepreneurs (“animal spirits”, in the words ofJoan Robinson). At this stage, it is of interest to re-analyse the statement made at the beginningthat “the economy is in balance, and there is no excess supply or demand on the product market”. Excess demand would increase investment, and hence production and employment at a later period. 147th excess supply, production falls below capacity and investment will decrease, with the consequential effects on employment and future consumption. The main conclusion is thus that an introduction of new technologies, in order to have positive effects on employment, should take place in a situation of supply-demand equilibrium, or even in a situation of some excess demand. The question is, therefore, which elements of final demand would have to take up this role: investment, private consumption, government consumption, or exports? Putting the burden on investment alone will, in combination with new technologies, certainly lead to excess supply. Necessary impulses, therefore, also have to come from private and government consumption.’ Consumption and income distribution How will new technologies prime effect will be, of course, at times to the benefit ofother that those people who belong because of new technologies government intervention, it is
affect consumption and income distribution? A the displacement of certain sectors of labour ($), sectors oflabour (I,). It is furthermore quite likely to that part of the labour force which is expanded will see their income increasing. N’ithout any thus likely that income distribution will worsen.
If (%/ah) > 0 and (atplah) > 0, and it is unlikely that the poor workers can be transformed into the rich class through retraining, and/or assuming there is not enough growth in the economy SO that (al,/ah)> (a$/&) and ax/ah is small, then unemployment is likely to rise. This can be shown by substituting Equations 8 and 5 into Equation 9, and differentiating with respect to h. Assuming population growth is independent of technological change, we have:
au =-[lr+ ah
-
lp]g -($ +3)X*
and (aUtl&) > 0 if the above conditions hold. How would such a change in income distribution affect consumption? In Equation 10, we have postulated such a changeto the effect that a change in FUTURES December 1981
488
A model of nezc technology and jobs
the equality index is affecting the overall propensity to consume (A). As we postulated earlier, a decline or a relative decline in consumption will probably affect growth. Of course, some of the fall-back in consumption could be picked up by an increase in productive investment. However, with an expected decline in consumption, people will be less willing to invest, and part of the foregone consumption could be very well spent on speculative investment. Conclusion The model has been elaborated with the intention of helping those examining the impacts of new technologies on employment to, at least, not ignore what economic theory can offer them. An extension to an empirical application of this model is, theoretically at least, straightforward. The introduction of new technologies can have positive or negative effects, depending on domestic policy. If new technology is introduced and there is government intervention, and this revenue is distributed to those people who are unemployed or poorly paid, then the economy could grow, the distribution of income could remain equal-yet there would still be unemployment. The choice is then for those who are unemployed to decide what to do with their increased time-assuming that the money they will get for unemployment benefits and so on will be sufficient for them to have alternative choices in using their leisure. On the other hand, if there is not substantial government intervention, then the economy could enter into a depression and face a substantial period of unemployment, possibly even leading to a dualistic economy of the type normally found in developing countries. On the other hand, preventing the introduction of new technologies could be equally fatal. In the short term, such a strategy could protect jobs. Eventually, this would make the competitive position of exporting industries rather poor, with the possibility that export opportunities would be lost (to competitors), eventually leading to reduced growth. Associated with this would be the need for consumers to pay more for domestically produced goods than for those produced on the world market. Because of the pervasiveness of the new microprocessor technology (see Radaq), it is clear that government will be forced to take some action; if they are unwise enough to follow laissez-faire policies (this itself being an intervention, allowing ‘free’ market conditions to exist), the prospects of a divided society with considerable levels of unemployment seem likely. Notes and References
I. For example,
government could decide to transfer incomes from highly paid and productive employment. to those not so fortunate or help them to retrain etc. 2. fVe are grateful to D.T. Nguven of Lancaster University, UK, for suggesting this approach. 3. Also from exports. In view of the uncertainty of export markets, exports also could stimulate part of the final demand only in exceptional cases where an aggressive export policy is followed, combined with suppressing costs and especially wage costs at home. Exports could be a leading factor in the increase of final demand. For simplicity, we have left the external sector out of the model. 4. J. Rada, The Impact of Micro-electronics (Geneva, ILO. 1980).
FUTURES December1981