Technology and Decent Employment: Latin America and Beyond

Lack of employment opportunities has been a longstanding feature of most Latin American countries, including Mexico, and one of the key reasons for historically high levels of poverty, deprivation, corruption, crime, and political violence. Lack of sufficient decent employment is now a widely recognized problem in the United States—one of the crucial issues in the election of Donald Trump was the loss of jobs, particularly in the manufacturing sector. According to the most recent studies, this loss of employment was more due to automation, than to trade liberalization, although this viewpoint has not gone completely unchallenged. The use of labor saving capital-intensive methods, however, has long been a feature of the Mexican industrialization process and, to a considerable degree, responsible for the historical inability of the country to generate sufficient employment.

Lessons of the Mexican Case

Mexico’s earliest quest for modernization occurred during the brutally repressive regime of Porfirio Díaz (1876-1911). His regime led a process of economic modernization that encouraged foreign (particularly U.S.) investment in agriculture and extractives, and fostered the development of a powerful native business class in northern Mexico. An integral aspect of this early industrialization process was government-sponsored oligopolies and the use of labour-saving technology. This latter was linked to both the availability of more advanced technology north of the border, and to the desire of the country’s business class to reduce its dependence on a recalcitrant labor force.

The capital-intensive feature of Mexican industrialization would continue through the twentieth century with the inflow of direct foreign investment, resulting in dependence on imported machinery, equipment, and technology. The use of machinery and technology also became a feature of the country’s northern commercial export agriculture. When the Green Revolution came to Mexico, it had a harmful impact on small and communal peasants who, if they could afford the new technology, were unable to apply it successfully. Highly indebted, many left agriculture to join the legions of unemployed in urban areas. This dependence on more advanced technology contributed to the country’s high level of underemployment. By the late 1960s, the proportion of the economically active population employed in the informal sector (essentially disguised unemployment) was estimated at between 50 and 60 percent.

The important lesson to draw from the Mexican case is the fact that the country’s industrial development and agricultural commercialization strategies were explicit policy choices; they were not inevitable. Mexico’s labor-saving economic growth arose from decisions made by an authoritarian ruling class (the so-called revolutionary family of large owners, financiers, and industrialists) who fiercely resisted redistributive measures and whose goal was the highest profits possible. The Mexican “miracle” of the 1950s and 1960s entailed increasing levels of inequality in which the bottom 20 percent of the population lost their share of national income. Let us be clear on this point: the replacement of labor by technology is a means to reduce costs and increase profits. This was true of Mexico and it is what is driving automation today. As the Mexican case so amply illustrates, the adoption of technology is not necessarily conducive to the greater good of society as a whole. The increasing use of technology needs to be managed so as to inflict the least harm while contributing to the greatest good. Unhappily, while we in the Global North are faced with rising automation, there is little discussion of how this should be managed.

The Importance (and Difficulty) of Managing Technological Change

Indeed, those who attribute job losses in the United States to automation take an almost fatalist attitude toward the phenomenon, appearing to presume that society must accept ever higher levels of unemployment in the interests of increased productivity and “progress.” It is almost as if the process is beyond human intervention on a par with growing old or the sun rising and setting. Some have proposed the idea of a basic income to compensate for the lack of gainful employment while others have suggested taxing robots as if they were workers. Such measures might serve to mitigate a sharp decline in consumer spending, further rises in inequality, and the rise in criminal activity often associated with high levels of inequality. However, the discussion has not gotten into the realm of how those who lose their jobs are to be kept busy even if they are provided with the basics with which to survive. This is a critically important consideration. In the Glass Cage, Automation and Us, Nicholas Carr alerts us to how our sense of happiness and personal fulfillment is tied to performing skilled work in the real world. Technology can improve the human condition or it can have a profound deleterious impact. Without intervention, the consequence will surely be the later.

While the global liberalization of trade and investment may not (any longer) be the major cause of job losses in Global North countries, particularly the United States, the current global trade and investment regime makes it difficult for nation states to find creative solutions to the employment issue. Business owners, motivated by the profit motive and generally unconcerned about the broader societal implications of the decisions they make, can readily discipline states that venture into new tax regimes and other measures by shifting their investments elsewhere.

The Challenge for Latin America

Automation will eventually have a significant impact on Latin America and that impact will be very much worse given the region’s more serious economic difficulties and social challenges. Countries, such as Mexico, with a younger workforce and low labor costs will perhaps be relatively more insulated from automation, at least for a time, than others will. While the recent commodity boom contributed to growth and employment expansion in many Latin American countries, this cycle has now ended and unemployment and underemployment are once again on the rise. For Mexico, the employment generation that was supposed to materialize with market liberalization and the North American Free Trade Agreement, did not occur. Hence, addressing the additional deterioration in employment opportunities wrought by automation is going to be particularly arduous. Strengthening social safety nets, improving education, and training, and measures to support and enhance research and development will be essential. However, without a strong employment generating industrial strategy, such measures will probably not be enough. As I have argued elsewhere, a strong society-wide political coalition will be a critically important requirement for such a new policy direction.