Perhaps in the future every human individual will be considered disabled. Few might think this will happen, but if you have doubts about it, I would like to invite you to join me in thinking about the evolution of the corporate world in human history. Historical evidence and records show that as far back as the Roman Empire, the corporate world has been the key to economic development in Western civilization. In Roman times, most companies were founded to share risks and reach higher profits, especially in the maritime business. Even though this argument is still going on among historians, I think “societas publicanorum” can be considered the origin of modern companies based on the cooperation of individuals in the economy.1
When the Roman Empire collapsed at the dawn of the Middle Ages, an entirely new culture and civilization grew from the remnants of the Roman law, and as the Catholic church succeeded in salvaging a great many Roman legal institutions. Roman approaches were applied in the church in procedures and in administrational and organizational frameworks (for example, note how the Pope is selected or how he governs the Vatican now like a CEO).
Then during the French Revolution the entrepreneurial power of societies and communities was unleashed. This process was accelerated during the first industrial revolution in the 18th and 19th centuries, as more and more investors created huge companies to concentrate the hired labor force and optimize the process of production, as well as to decrease the high cost of transportation between continents.
By the 20th century, successful big firms had developed their own corporate cultures to motivate workers to cooperate and specialize in further areas for higher profit and a higher levels of mass production. Corporations recruited the best workers by offering more lucrative conditions and valuable in-house training to maintain loyalty and increase competitiveness, especially in the age of the rise of nations eager for colonization. The United States also stepped unquestionably onto the world market, founded on the pillars of entrepreneurships and individualism stemming from the heritage of the French Revolution.
Access to information about workers’ skills and experience remained limited for centuries. The costs of recruiting the best workers on the market, together with the costs of producing ever more complex products and services were increasing all the time. Therefore it was in the best interests of a company to keep its labor and knowledge together to prevent competitors from having access to new information on technology and innovation, including access to markets themselves. That is partly why monopolies were eventually formed during the age of colonization. In other words: the overly high risks of the marketplace justified the formation of monopolies because monarchs and states considered monopolies reasonable compensation for the high risks entrepreneurs had to take.
After the European settlement of the Americas, the risks of finding and establishing new trade routes were extremely high. European nations started operating in new (globalized) markets in fierce competition. At the same time, the corporate world was also associated with workplace stability. The corporate world provided a clearer structure with differentiated jobs under the same roof, which then led to workers having new and more predictable careers, and a more secure future. This phenomenon eventually allowed the so-called middle class to rise and prosper.
Nevertheless, companies continued to have the upper hand because they had exclusive access to knowledge and relevant information based on growing and extensive research within the company. Research and competitive knowledge, after all, turned out to be of the greatest importance, as it was in fact becoming the property of companies who had been heavily investing in it.
At the end of the last millennium, personal computers and their wide application in general also triggered R&D activities in science. More and more processes were supported, evaluated, and finally planned by so-called data computing, which in turn replaced thousands of employees. PCs have been inevitably gaining importance and now exert influence ubiquitously in all spheres of our lives. And now we are in the age of the smartphone, which creates a newer momentum in technology and development. The think-tank Andreessen Horowitz estimates that new iPhones released and sold during the first weekend in September 2014 had 25 times more computing power than the whole world back in 1995. Therefore the use of smart software has become a fundamental tool for organized work, providing the promise of readiness as well as the ability, even for individuals, to react immediately to market demand.
Based on the special briefing on the future of work by the Economist (Jan. 3, 2015) , the editors think that “the ubiquitous platform of the smartphone to deliver labor and services in a variety of new ways will challenge many of the fundamental assumptions of 20th-century capitalism.” Since all the information regarding employees’ professional skills, performance, and their work history has also become available on line, the transaction costs in many fields have also become lower in comparison to traditional forms of employment. This has driven other costs down further by opening up to a globalized work market as well. For example, the service provider InCloudCounsel recently undercut big law firms by as much as 80% in fees by using the available freelancers on the market who can deal with all the jobs lawyers do not want to be tied down with. This actually means that a new form of economy is emerging: the “on-the-demand individualized economy” right after the age of knowledge-based economy.
Even though we might not be aware of it, the real competition has only just begun. It definitely – and seemingly inevitably – leads to a situation where only the best of the best workers will be able survive by making themselves individual corporations, or who will be able to create the world of “corporate individualism” equipped with smart and effective solutions, available on the Internet all around the globe. The risk is that even these “winners” might see themselves as bogus entrepreneurs driven into a new working status compelled by economic necessity, cost-efficiency, and the developing technological environment – and this process will create dwindling labor rights, sustainability, and social security.
With these growing risks and potentially dangerous challenges, we cannot talk about a middle class from a classical point of view. The more insecurity faced by (even well-educated) working people, the less they are able to be part of a strong middle class. The model of consumer society cannot be sustained by people who lack a stable income or the financial ability to invest in their own education and skills. Are even these “winners” going to be “disabled” in a way, in comparison to tireless and competitive smart solutions and automatization in the end?
Why? Because, according to a 2012 report of the U.S.-based Information Technology and Innovation Foundation, between 2000 and 2010 only four sectors (petroleum and coal, machinery, chemical production, and computer and electronics) out of 19 added value. However, without exception all sectors saw a serious decline in employment altogether. It is interesting to note that computer products generated more than 400% growth in terms of value added. This is three times higher than the second highest growth rate (that of the also historically very fruitful petroleum and coal industry) in the U.S.
Based on current innovations and investments, even the sector producing computers and electronic products will eventually require fewer and fewer workers (about −25%) in the U.S. It follows that the existing demand for the work force will evidently decline due to the higher rate of rising computerization. And we are at just the beginning of newer generations of smart software and solutions with the capacity of hundreds or even thousands of people, which will be able to learn from and even teach each other. As history recorded, the first computer able to learn was developed in 1950s. Now Google or Amazon search engines and deep learning applications are already familiar with the needs and habits of millions. This is certain to inevitably replace the jobs of millions working in the retail industry in the long run. But how and why?
The trend is quite frightening when looking at the situation of the middle class, the spine of every society, especially during the past 30 years in America. According to the U.S.-based Pew Research Centre, between 1970-2010 aggregate household income among the middle class dropped from 62% to 45%, while that of the upper income segment grew 29% to 46%. (The lower income figure has remained the very same.) In addition to this phenomenon, when it comes to long-term unemployment, we can see here a more or less constant rise in the U.S. since the 1970s from under 1% to around 2,5% by 2013. Based on the OECD figures, in the U.S. the proportion of jobless people who are long-term unemployed rose from 10% to 30% from 2007 to 2012, which is indeed a significant change.
The real question here is who will pay for the final price of growing unemployment and how are they going to deal with it? The crisis of handling growing unemployment will inevitably be political. The solution cannot be more globalization and even freer (financial) markets. There is an established argument among economists that further global liberalization of markets might only bring an additional 0.3-1% growth in global GDP. It is increasingly evident therefore that the three liberties, namely movements of capital, goods, and people, are showing diverging disparities. It is especially true of the movement of people in terms of employment since people, in comparison to capital and goods, have remained and evidently will remain less flexible and mobile. This is especially true in Europe, with its myriad of proud nations and varied cultures and languages. It is seen that fewer Europeans leave their countries to seek work abroad – a fraction of the numbers leaving the U.S. or even Japan for work elsewhere. This is partly due to language barriers. It is also due to different traditions of entrepreneurship as well as the heritage of family business. Especially in Eastern Europe, Communist rule generally succeeded in erasing the culture of successful small and medium-sized enterprises (SMEs), and in supressing both a strong civil society independent of national government, and the involvement of foreign business interests.
These are the most basic principles and phenomena we have to bear in mind, especially in Europe. We therefore need to be cautious regarding a time frame when reforming liberties for movement of capital, goods, and people in parallel. Otherwise we face a massive crisis and unbearably increased inequality in the developed world – and this is all happening sooner than one may think.
László G. Lovászy, Ph.D., is a Member of the United Nations CRPD Committee. Email: firstname.lastname@example.org. Website: http://www.ohchr.org/EN/HRBodies/CRPD/Pages/Membership.aspx.
1 Even in Roman law there were legal forms and institutions so that entrepreneurs and customers engaged in legal disputes could be protected by formal safeguards. In my understanding it was the legal basis for trade and hiring people to map out, organize, transport, and deliver goods – therefore these Roman “companies” were able to assume rights and obligations, e.g., file actions against fraud or embezzlement, own property, and even inherit items ( habere res communes ).