Technology, not globalization, cause of inequality

by Morton I. Sosland Editor-in-Chief
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   Expanding global attention to increasing inequality in economic outcomes has begun to raise concerns that have relevance to industries like grain merchandising and grain milling and processing. Milling is one of the very first, if not first, industries to utilize technology to reduce its manpower requirements and thus to boost reliance on skilled operatives. This began for milling in the 18th century. Milling in the 21st century is still actively in pursuit of advances in the way it mills wheat into flour and handles the distribution of finished products with many of the same goals in mind. It is the rare miller, regardless of where plants are operated, who does not face problems in securing employees capable of dealing with and operating the most efficient equipment. Yet, it is also this drive for advances in efficiency that is more and more being associated with rising inequality not just in economic well-being, but also in the way current wages are being compared among various population groups.  

   In a recent address in Omaha, Nebraska, U.S., Ben S. Bernanke, chairman of the U.S. Federal Reserve Board, sought to focus on the level and distribution of economic wellbeing in a way that offers important advice to industries like grain trading and grain processing. It is Bernanke’s view that workers’ skills and advanced technology are complementary. This means that industries   and companies that invest in research and development as well as in information technologies “hire relatively more high-skilled workers and spend a relatively larger share of their payrolls on them.”  

   Along the same line, the Federal Reserve chairman says the long-term tendency toward greater inequality reflects the way in which real wages of workers with more years of formal education have increased more quickly than those of workers with less education. “To a significant extent,” he declares, “to explain increasing inequality we must explain why the economic return to education and in the development of skills more generally has continued to rise.” He leaves no doubt but that improvements in information and communications technologies — all computer related — have raised the productivity of high-skilled workers much more than low-skilled, a finding affirmed by the experience of grain processing.  

   Bernanke’s emphasis on the implications of “skill-based technical change” leads him to the conclusion that this is a more important cause of inequality than the often targeted issues having to do with globalization. “I read the evidence as favoring the view that the influence of globalization on inequality has been moderate and almost surely less important than the effects of skill-based technological change,” he proposes. He advises   against trying to correct inequalities by inhibiting the dynamism and flexibility of labor and capital markets or by erecting barriers to international trade and investment.  

   These are steps that have prompted much concern on the part of the global grain industry. The industry already has heard political critics of wage inequality blaming this on globalization. Bernanke brings his respect to trying to explain the causes and also to espousing stepped-up investment in education as ways to ease the social and economic problems caused by the inequality that has worsened considerably in recent years. Along with education, he suggests ways to ease the pain of dislocations that result from dynamic markets and rapid progress in technology.  

   The global grain industry may only heartily applaud his prognosis and his warnings against hindering the adoption of new technologies or inhibiting trade flows. Either of these steps “would do far more harm than good, as technology and trade are critical sources of overall economic growth and of increases in the standard of living.” Hardly any industry has a greater stake than grain in assuring that this wise message is heard and adopted by as many nations as possible.