Introduction — The entire economic system is collapsing

The COVID-19 outbreak is becoming a global stress test. As the number of people infected with the virus continues to rise around the world, uncertainties about global economic growth increase. The virus will have a far-reaching impact on the capacity layout, production and supply chain network of many enterprises. In an effort to stem the virus’s spread, large swaths of the workforce are retreating into their homes to work remotely. Those who remain in the workplace are practicing social distancing where possible, and employing rigorous sanitation practices. And once our work is virtualized, it can be digitized, tracked, turned into data and used to train an AI system to mimic how we work.

Moreover, the as-yet-unknown economic ramifications of COVID-19 have prompted panic selling on the stock market, and an oil price war between Russia and Saudi Arabia. Global financial markets crashed on Mar. 9 and fell to record lows on Mar. 12. They crashed again on Mar. 16.

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Our economic leaders show no grasp of the scale of the crisis or of what needs to be done, warns Avi Tiomkin, macroeconomic consultant to global funds. Since the current global model is containment until a vaccine is found, which is liable to take a year or more, it is essential to understand that what we are facing could be the collapse of the global economic system, accompanied by huge unemployment, which in liable to bring in train the destruction of the social order that we have known since WWII, with social unrest culminating in mob rule. Under these conditions, action should obviously be without any fiscal constraints, with an almost hermetic floor being provided for all sections of the economy: large and small businesses, employees who are still working, the future unemployed masses, and the local authorities.

Unemployment caused by COVID-19

Currently, american workers are getting laid off at an unprecedented pace as the coronavirus outbreak shuts down much of the economy, and the government safety net to help the newly jobless appears ill-equipped to handle the surge in the unemployed. The Labor Department reported Thursday that 281,000 people applied for jobless benefits last week, up 33 percent from the prior week. Economists say it’s only going to get worse. New York restaurateur Danny Meyer’s Union Square Hospitality Group let 2,000 workers go this Wednesday. Pebblebrook Hotel Trust, which oversees 54 hotels, laid off 4,000 employees Tuesday. MGM Resorts and Caesars have begun letting staff go, along with countless smaller restaurants, bars, gyms and coffee shops. Already, state unemployment insurance offices are reporting real-time record spikes in claims. Virginia saw a 33-fold increase in unemployment claims this week, while Pennsylvania and Colorado reported increases of nearly 20 times the usual volume.

The situation is so bad that the Trump administration asked states to abstain from releasing unemployment-claims figures prior to the publication of a national compilation of weekly U.S. jobless claims, according to a state labor department official. Source

The incoming evidence suggests initial jobless claims could soon triple from the low 200,000s. Neil Dutta, head of macroeconomics at Renaissance Research, calculates that new jobless clams could climb to as high as 650,000 in the next few weeks based on the spike in Google searches. If so, new claims could match the highest levels of the Great Recession. New jobless claims peaked at 655,000 in March 2009. Source

Goldman Sachs warns data point to a historic and frankly apocalyptic surge in unemployment insurance claims, from current 281,000 to 2,250,000 in next week’s report.

Economists from GS estimate that more than two million workers are expected to lose their jobs by the end of March,, a dramatic turnaround from February when the unemployment rate was near a record low. Ball State University economist Michael Hicks predicts this month could be the worst for layoffs in U.S. history. Source . Most of them are living paycheck to paycheck and nobody was prepared for this economic catastrophe. Source Some 18% of adults reported that they had been laid off or that their work hours had been cut, a new poll found. Source

Other corporations are not paying their workers, extending health insurance benefits, or offering severance in the case of layoffs or reduced schedules caused by the coronavirus. Research has shown workers who experience layoffs suffer damaging effects to their mental and physical health, which could worsen under the current economic conditions caused by the coronavirus as businesses are closing or imposing hiring freezes. “For the victims of layoffs, there is a connection between the severity of their financial distress and their mental and physical health outcomes,” said Paul Davis, a professor at Cornell University’s School of Industrial and Labor Relations.

“While reports of depression, apathy, fear, weight loss, poor sleeping, physical pain, and weakened immune systems are all common among layoff victims, these effects can be exacerbated for those in dire financial straits. For laid-off hospitality and travel workers, who have few options for re-employment due to reduced consumer demand and government mandated closures and thus little control over their immediate financial situations, the consequences of the layoffs may be devastating.”

According to Moody’s Analytics, nearly 80m jobs in the US are currently at risk due to the coronavirus, more than half of the jobs in the US economy. Impacts are being felt throughout the retail, food, hospitality, service and entertainment industries with many businesses and productions completely shutting down.

Many workers who are still employed through the coronavirus are being docked for taking any time off, and not receiving any additional paid time off or sick leave through the coronavirus outbreak. In Hawaii, the tourism industry, which makes up over 20% of the state’s economy and employs around 216,00 people, has nearly halted entirely. Source

Buybacks before COVID-19

According to a July 2019 article.

U.S. companies are on pace to break another record for share repurchases in 2019, using a combination of cash and debt to push the total to close to $1 trillion. For the first time since the financial crisis, companies have given back more to shareholders than they are making in cash net of capital expenditures and interest payments, or free cash flow, according to Goldman Sachs calculations. The level of buybacks to free cash flow hit 104% for the 12 months ending in the first quarter of 2019, the first time that number has topped 100% during the economic recovery that started in 2009. In 2017, the level was 82%. The rise in buybacks has had a twin effect on corporate balance sheets, both drawing down cash and increasing leverage. It also represents a more-of-the-same trend that has come despite the $1.5 trillion tax cut passed in late 2017. The record cut had spurred hopes that companies would eschew the buyback formula that has helped generate the longest bull market run in Wall Street history and instead lead to more investment in equipment and personnel. “Although we expect growth in capex, R&D, and cash M&A, we expect companies will continue to increase cash return to shareholders as they have in recent years,” David Kostin, chief U.S. equity strategist at Goldman, said in a report for clients. Over the past 12 months, nonfinancial companies have drained $272 billion in cash as part of the push to return still more money to shareholders. That represents a 15% decline and is the steepest drop since at least 1980, Kostin said. At the same time, corporate leverage continues to rise as gross debt outstanding has climbed 8% over the past 12 months. That has come during a rough time for corporate profits, with S&P 500 earnings tracking for a 2.6% second-quarter decline, according to FactSet. Source

The 10 year bull market was eaten away by buybacks, gig employment and empty promises. The biggest U.S. airlines spent 96% of free cash flow last decade on buying back their own shares and now they are asking for a bailout. Source.

That’s why, companies will now shrink they operations and will be thinking about cutting the problematic factor — Us. Their first idea will be to relocate manufacturing. During the 2011 earthquake in Japan, even companies who were hardly hit by supply chain issues decided to relocate. However, cross-border relocation of production capacity is not an easy decision to make, and many factors need to be taken into account, such as local market capacity, time and investment required, local government policies, infrastructure and logistics, labour costs, skill levels and so on. The next logical solution? Automation

Two types of automation:

Manual Automation

There are entire towns in the US build around factories or mines that require manual workforce. For the last decades factories are being automated more and more and if you automate fully such a workplace plenty of people will lose their job and won’t #learntocode. Statistics show that most of towns centered around one automated workplace will turn toward drugs. How unemployment is tied with illegal drug use. Why? Humans need a goal, should it be work, volunteering or creating. Without one most of us feel useless and without a purpose. Additionally, a sole big workplace closing down causes extra mass layoffs, not only the primary worker loses its job, but a shopkeeper, a teacher and a tire shop owner. It is called the ripple effect. A mine closing down = x3 more job loss for a town.

What happen when a factory town closes down Least we forget, Trump won the presidency because he promised to give back the jobs’ lost. Out of the 8.9M promised he created only 154k

Intellectual automation

However, the current automation is not the same as 200 years ago or 100 years ago where industrialization replaced only the physical workforce. The industrial revolution only replaced human muscle power. Humans are not just muscle. We are not just beasts of burden. We have powerful brains, which the industrial revolution did not replace but instead created many new mentally challenging positions for, involving the maintenance, installation, repair and improvement of industrial machinery. Now we see our brains replaced. And I get that, companies to stay afloat need to move with the current and need to R&D cut costing methods like automation. However, it is not a long-term solution because there’s a point where the population had it enough. You, me, everyone around us can only provide manual, intellectual or creative work. If you take the first two how will you pay your rent? Everyone will become artists and sell their artwork? Most society revolt when someone is attacking their family, the helpless or close ones. A famine, a pandemic (in that case…), a natural disaster or shady government are toppled because the citizens doesn’t have enough means to help their families. Why do civilizations collapse.

Abandon all hope, ye who enter here

China and Manual Automation

COVID-19 caused Chinese companies to rush to deploy robots and automation technology as the coronavirus spreads throughout the nation. A survey by the American Chamber of Commerce Shanghai found nearly half of the 109 companies polled in that city and metro area said lack of staff is their biggest challenge over the next few weeks, while two-thirds noted they don’t have sufficient staff to run a full production line.

To reopen a company’s factory in the eastern Chinese city of Huaian, the plant-director must submit documents to the Chinese government for his employees in China, listing their health status, recent travels, dates, quarantine and isolation periods. They also must make sure that the hi-tech plant is disinfected. When work restarts, employee temperatures will be monitored twice a day and workers will be outfitted with masks and gloves. Production will be ramped up slowly as employees return to work, and output will be carefully monitored. All staff have been paid their full salary during the production shutdown, which overlapped with the two-week long Chinese New Year holiday starting Jan. 25. That’s a lot of work don’t you think?

So that’s why, for all the CEOs, Directors and shareholders, robotics can reduce labor costs and increase productivity — and prevent a recurrence of future plant shutdowns. The coronavirus has been a wake-up call for supply chain managers and risk managers in both China and the U.S., said Rosemary Coates, executive director of the Reshoring Institute in Silicon Valley.

Identifying ways to keep factory production going in those Chinese factories that have re-opened may include the use of more robots and other automation that substitute for humans. “China bought more robots last year than any country, and now is the time to put them to work,” Coates said.

Clearly, the virus outbreak has put a “renewed urgency behind the trend towards increased automation and use of robotics in China,” says Emil Hauch Jensen, vice president of sales at Mobile Industrial Robots in Shanghai, which is fielding dozens of requests. The company’s autonomous robots, which can move pallets and heavy loads across warehouse and factories, are being used across a wide range of industries by large players such as Ford, Airbus, Flex, Honeywell and DHL. Jensen points out the cost benefits: one robot that can work a 24-hour shift can replace three workers and cost in the range of $43,000 to $72,000.

Meanwhile, with travel and transportation bans in effect in China and stores, restaurants and schools closed, robots are being deployed for a wide variety of crucial services, from disinfecting hospitals and streets to delivering food, drugs and supplies. Source

China Daily, Photographer: Zhu Xingxin

And it is not only China… First 3D printed house in Belgium. Even construction workers are to be automated soon.

US and the Knowledge automation. Robots are already our bosses

As the continued spread of COVID-19 disrupts workplaces and travel plans around the globe, customer service centers are experiencing an unprecedented uptick in overall call volume. As customer representatives are increasingly ordered to work from home in Manila, the U.S., and elsewhere, some companies are turning to AI to bridge the resulting gaps in service. LivePerson, a global tech company that develops conversational commerce and AI software, says it has observed “significant” increases in volume on its conversational platform, which is used by over 18,000 brands, including Sky, IBM, Vodafone, Virgin Atlantic, and RBS. Overall conversation volume has jumped by about 20% since mid-February, with verticals like airlines and hotels experiencing 96% and 130% climbs, respectively.

And there is also the management automation. Already, the robots are watching over hotel housekeepers, telling them which room to clean and tracking how quickly they do it. They’re managing software developers, monitoring their clicks and scrolls and docking their pay if they work too slowly. They’re listening to call center workers, telling them what to say, how to say it, and keeping them constantly, maximally busy. While we’ve been watching the horizon for the self-driving trucks, perpetually five years away, the robots arrived in the form of the supervisor, the foreman, the middle manager.

These automated systems can detect inefficiencies that a human manager never would — a moment’s downtime between calls, a habit of lingering at the coffee machine after finishing a task, a new route that, if all goes perfectly, could get a few more packages delivered in a day. But for workers, what look like inefficiencies to an algorithm were their last reserves of respite and autonomy, and as these little breaks and minor freedoms get optimized out, their jobs are becoming more intense, stressful, and dangerous.

It was Henry Ford who most fully demonstrated the approach’s power when he further simplified tasks and arranged them along an assembly line. The speed of the line controlled the pace of the worker and gave supervisors an easy way to see who was lagging. Laborers absolutely hated it. The work was so mindless and grueling that people quit in droves, forcing Ford to double wages. As these methods spread, workers frequently struck or slowed down to protest “speedups” — supervisors accelerating the assembly line to untenable rates.

We are in the midst of another great speedup. There are many factors behind it, but one is the digitization of the economy and the new ways of organizing work it enables. Take retail: workers no longer stand around in stores waiting for customers; with e-commerce, their roles are split. Some work in warehouses, where they fulfill orders nonstop, and others work in call centers, where they answer question after question. In both spaces, workers are subject to intense surveillance. Their every action is tracked by warehouse scanners and call center computers, which provide the data for the automated systems that keep them working at maximum capacity. Source

And let me be clear, it’s not the robots that are coming for your job. ‘Robots’ are not currently algorithmically scanning LinkedIn and Monster.com with an intent to displace you with their artificial intelligence. Nor are ‘robots’ gathered in the back of a warehouse somewhere conspiring to take human jobs en masse. A robot is not ‘coming for’, or ‘stealing’ or ‘killing’ or ‘threatening’ to take away your job. Management is. And we need to wake up. This is not a faceless phenomenon of inexorably improving technology that we all must submit to. This is, quite often and quite simply, rich business owners and the executive classes locating new ways to make themselves richer.

As the New York Times’ Kevin Roose reported from Davos, the world’s business leaders are rather eager to implement automation — they see those robots as a chief means of staying ahead of the competition, of improving profit margins, of cutting costs. Thus, they have decided to buy and build more robots that, yes, will put people out of work. It could be said, without much exaggeration, that, far from spontaneously swarming to the factory floor, the robot armies that “are coming for your jobs” are in fact largely organized by the kind of elites who go to Davos. Source

You want to fight the change? AI is here to replace you, to control you and (probably) to kill you.

Replace your voice, your face, your job

Already companies are banking on the coronavirus. Xaqt, a company that provides call center services created a special “Coronavirus Call Center Solutions” Source

However, staffing a contact center during a public health crisis is a challenge. When call volume spikes or when there aren’t enough people to staff the call center, this will lead to long wait times for callers and high abandon rates. In these conditions, callers will not have access to the information they need or may become frustrated by having to wait so long to speak to an agent.

AI clones your voice

Google and Facebook are also deploying even more AI to moderate the content. Starting this week, they informed all contract moderators to work from home or just not to come to the office. And they will also begin to lean more heavily on those machine-learning systems in an effort to automate content moderation during this time of crisis. And on Monday evening, both Facebook and Twitter followed suit. Here’s Paresh Dave in Reuters:

Facebook also said the decision to rely more on automated tools, which learn to identify offensive material by analyzing digital clues for aspects common to previous takedowns, has limitations. “We may see some longer response times and make more mistakes as a result,” it said. Twitter said it too would step up use of similar automation, but would not ban users based solely on automated enforcement, because of accuracy concerns.

And recruiters are also being replaced by AI. Unilever has claimed it is saving hundreds of thousands of pounds a year by replacing human recruiters with an artificial intelligence system, amid warnings of a populist backlash against the spread of machine learning.

The multinational told the Guardian it had saved 100,000 hours of human recruitment time in the last year by deploying software to analyse video interviews. The system scans graduate candidates’ facial expressions, body language and word choice and checks them against traits that are considered to be predictive of job success. Vodafone, Singapore Airlines and Intel are among other companies to have used similar systems. Source

U.S. banks are also implementing the AI system en masse. Over the next decade, they are investing $150 billion in technology annually, and will use automation to eliminate 200,000 jobs. The job cuts are slated to hit front offices, call centers, and branches the hardest, where 20–30 percent of those roles will be on the chopping block. They will be replaced by better ATMs, automated chatbots, and software instruments that take advantage of big data and cloud computing to make investment decisions. As a result, we can expect to interact with even more customer service chatbots and automated call menus (whether they work well or not), to see more financial decisions turned over to algorithms, and a continued flood of software products to enter the banking industry. Source

Control you

This epidemic has given the Chinese government a perfect excuse to drag out its massive surveillance system as authorities in China step up surveillance and roll out new artificial intelligence tools to fight deadly COVID-19.

Let’s backtrack a bit, in 2017, the State Council of the People’s Republic of China published the Artificial Intelligence Development Plan (here you can find the original document in English). This strategy is part of the even bigger national “Made in China 2025” plan and will also be linked to the new (digital) Silk Road.

Furthermore, stricter rules and regulations adopted during Xi Jinping presidency, coupled with a more centralized system established after the March 2018 constitutional reform, changed the social and political context, allowing the government to suppress social discontent and increase government control over the population. A control that is exerted more and more through technology, pushing to the extreme what has been labeled as the age of “surveillance capitalism”, that is, the use of artificial intelligence (AI) software and machine learning tools that study consumers’ behavior in order to predict their likes and preferences. Source

This system us used with the “social credit system” as a new and powerful tool to control the public. The system will rate the “trustworthiness” of all Chinese citizens based on a wide range of criteria, including their credit card records, traffic violations and contributions to the nation. Citizens with low “social credit scores” will be punished in various ways, such as not being allowed to travel. Source

Also the AI CCTV camera are “helping” the so-called Integrated Joint Operations Platform, a regional data system that uses AI to monitor the countless checkpoints in and around Xinjiang’s cities. Surveillance cameras around the country have been set up in a way to immediately identify Uighurs — their social profile and their facial attributes — around the streets.

The same surveillance is happening in the US. A shady startup called Clearview AI which, as a New York Times investigation earlier this year revealed, has been mining your pictures online to build a vast facial recognition database. At first, Clearview AI maintained that its tool was only meant to be used by law enforcement and a few private companies. But it later became clear that the company has consistently misrepresented both the extent of its work and the breadth of its aspirations. Now, with COVID-19 upon us, an Austin, Texas-based technology company is launching “artificially intelligent thermal cameras” that it claims will be able to detect fevers in people, and in turn, send an alert that they may be carrying the coronavirus.

And in the middle of Covid pandemic, in summer 2020, Clearview AI landed a contract with ICE… Clearview was already known to work with the branch of Homeland Security fiercely criticized for implementing the Trump administration’s harsh immigration policies. The new contract makes it clear that relationship is ongoing — and that Clearview isn’t just playing a bit part in tech’s lucrative scrum for federal contracts.

First spotted by tech watchdog Tech Inquiry, the new contract is worth $224,000 and will provide the agency with what is only described as “Clearview licenses,” likely just access to the company’s software services. According to the award notice, the funding office for the contract is Homeland Security Investigations (HSI), a division within ICE that focuses on “cross-border criminal activity,” including drug and human trafficking. Four companies competed for the contract. Source

Athena Security is pitching the product to be used in grocery stores, hospitals, and voting locations. It claims to be deploying the product at several customer locations over the coming weeks, including government agencies, airports, and large Fortune 500 companies. Athena previously sold software that it claims can detect guns and knives in video feeds and then send alerts to an app or security system. Christopher Ciabarra, a co-founder of Athena, told Motherboard in a phone call, “We actually detect the person on the AI side, then we detect the face, and we look for the eyes.” “We take the temperature of the eyes because that’s the closest point to the core of the person’s body temperature,” he added. Source

AI CCTV in UK

AI CCTV in France

Clearview and AI in the US

And finally, dispose of you

Automated tanks, rovers, drones and turrets

A Chinese technology firm is testing a new attack drone specifically designed to help ground troops in street-level combat, in the hope that it can sell the unit abroad, reports say. Engineers recently completed a successful air-to-ground test firing exercise for the mini quadcopter named Tianyi, Modern Weaponry reported. The developer, Tianjin Zhongwei Aerospace Data System Technology, said the unmanned aerial vehicle had been designed to carry out both reconnaissance missions and close-range strikes against armoured vehicles or individuals in an urban environment. Source

And in the US — Optionally manned’ robotic gun is Army’s latest step toward autonomous weapons — ATLAS autonomous tank program. Source

#learntocode is a joke

The common refrain you see in comments sections of articles about automation is “the industrial revolution created more jobs than it destroyed”. A thing happened in the past, so a similar thing must turn out the same way. So, looking for job security in the knowledge economy? Just learn to code. At least, that’s what we’ve been telling young professionals and mid-career workers alike who want to hack it in the modern workforce.

Anyone competent in languages such as Python, Java, or even web coding like HTML and CSS, is currently in high demand by businesses that are still just gearing up for the digital marketplace. However, as coding becomes more commonplace, particularly in developing nations like India, we find a lot of that work is being assigned piecemeal by computerized services such as Upwork to low-paid workers in digital sweatshops.

And learning code is hard, particularly for adults who don’t remember their algebra and haven’t been raised thinking algorithmically. Learning code well enough to be a competent programmer is even harder.

Universal code literacy won’t solve our employment crisis any more than the universal ability to read and write would result in a full-employment economy of book publishing.

Let me ask you, how can you retrain a 50 yo trucker to be a Back-End programmer? How can you tweet #learntocode to a 55 yo cashier? It is a crime against humanity but this time it caused by corporations trying to move aside the unpredictable part of the equation — Us. No more sick leaves, no more PTO, no more maternity leaves. And COVID-19 just proved them how fragile humans are.

And it’s actually worse. A single computer program written by perhaps a dozen developers can wipe out hundreds of jobs. As the author and entrepreneur Andrew Keen has pointed out, digital companies employ 10 times fewer people per dollar earned than traditional companies. Every time a company decides to relegate its computing to the cloud, it’s free to release a few more IT employees. Source

“Designing ourselves out of the picture, little by little, scoffing at the idea that we’ll ever actually succeed at it. Playing a grand game of chicken, trying to push machines as close as possible to a complete set of human capabilities without getting so close that it begins to ask uncomfortable questions like “why am I working for you instead of myself”.”

According to the McKinsley report 800 million jobs will be taken by automation by 2030

Conclusion

The 1789 revolution happened because the people of France were growing increasingly more upset with treatment they received from the upper and royal classes, mainly due to special privileges. The 1917 was similar in cause. Families lived just above the subsistence level, and around 50 percent had a member who had left the village to find other work, often in the towns. As the central Russian population boomed, land became scarce. This way of life contrasted sharply with those of rich landowners, who held 20 percent of the land in large estates and were often members of the Russian upper class. source. The great depression of 1929 had only 8% of unemployment rate.

As you may see we are getting closer to the same causes as 200 years ago and 100 years ago. Rich getting richer and using automation to force “peons” out of work. 60% of Americans have less than 1000 USD in their savings Source and most are living from paycheck to paycheck in 2019. With this crisis unemployment in the US could soar from record low levels to 20% if strong action is not taken to tackle the coronavirus, said the US treasury secretary, Steven Mnuchin. With 20% of the population laidoff it just proves to companies that they can exist without the worker.

You can’t compete with Automation and the will of greedy CEOs.

The percentage of jobs to be automated in the next 10 to 20 years is 70% for the low-skill jobs, 46% for the middle-skill level. And as we all know, most of the population works in these 2 categories and their wage didn’t grow since 1979 . At the moment there are just in the US, 3.5M truck drivers, 3.5M cashiers 3M clerks, 2.3M customer rep (that can and will be replaced by automation). Take the above unemployement rate and these 10M to 15M and their families (x3) so 45M–80M Americans without a salary. It’s 1/4th of the country. You have a revolution.

Even if all accountants, lawyers, clerks and truck drivers go for trade you can’t have 200 million plumber, electricians, and gardeners in the States… Let’s be real. The ONLY one to profit from it will be Bezos and his peers. Jeff Bezos abruptly cuts health benefits for nearly 2,000 part-time Whole Foods workers. They are just waiting in the starting blocks to start firing employees.

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