The Technology Trap Read online

  It is easy to oversimplify history. However, if there is one predominant factor underlying economic and social change over the past two centuries, it is surely the advancement of technology. Without technological change, “capital accumulation would amount to piling wooden plows on top of wooden plows,” to borrow Evsey Domar’s phrase.7 Economists estimate that over 80 percent of the income differences between rich and poor countries can be explained by differential rates of technology adoption.8 And relying on income alone hugely understates the transformation that has taken place. It is quite extraordinary to think that in the world my great-grandmother was born into, people could not travel faster than horses or trains could carry them. The only escape from darkness during night was the candle and the oil lamp. Jobs were physically demanding. Few women did paid work. The home was the woman’s workplace, where meals were prepared on an open hearth, and trees had to be chopped down for fuel to cook with and keep the house warm. And buckets of water had to be carried indoors from a stream or well. Unsurprisingly, people felt much enthusiasm for progress, not to say euphoria. A 1915 article published in Literary Digest confidently predicted that with electrification, it “will become next to impossible to contract disease germs or get hurt in the city, and country folk will go to town to rest and get well.”9 Edison himself was convinced that electricity would help us overcome the greatest hurdle to further progress: our need to sleep. Technology was the new religion of the people. There was the sense that there was no problem that technology could not solve.

  In hindsight, and in the light of the gains brought by technology, it is astounding to think that economists of the early nineteenth century like Thomas Malthus and David Ricardo did not believe that technology could improve the human lot. The technological virtuosity of the nineteenth and early twentieth centuries took some time to trickle down to the economics profession. But in the 1950s, Robert Solow, who would go on to win the Nobel Prize in Economics in 1987, found that virtually all economic advance over the twentieth century had been thanks to technology. And others documented that those gains had been widely shared. Simon Kuznets found that America had become more equal and advanced his theory of capitalist development in which inequality automatically decreases along the industrialization path. Nicholas Kaldor observed that labor had consistently reaped about two-thirds of the gains of growth. And Solow developed a theoretical framework in which progress delivered equal benefits for every social group around that time. Seen through the lens of today, such optimism might seem absurd. But the economist of the 1950s had much to be optimistic about.

  What do the jobs of a few lamplighters matter if society as a whole can become both richer and more equal simply by letting technological creativity thrive? Many displaced lamplighters probably even found less hazardous and better-paying jobs. And even if some lost out to technology, it seems right that society willingly accepted progress for the many at the expense of the few. But would we feel that way if the victims of progress had been more plentiful? What if the majority of replaced workers were forced to move into jobs that paid less well? After all, the “special century” was not just special in that it excelled in economic growth.10 Just as important was the fact that almost everyone gained from progress. While there were clearly labor-replacing technologies, most were of the enabling sort. Overall, technology served to make workers more productive and their skills more valuable, allowing them to earn better wages. And even those who lost their jobs to the force of mechanization had a greater abundance of less physically demanding and better-paying jobs to choose from as a consequence. In the age of artificial intelligence (AI), as this book will argue, such optimism about technology can no longer be taken for granted. Nor has it been the historical norm. Economists of the golden age were right to be optimistic about the time in which they lived. Their mistake was in thinking that what they witnessed would continue indefinitely. There is no iron law that postulates that technology must benefit the many at the expense of the few. And quite naturally, when large swaths of the populace are left behind by technological change, they are likely to resist it.

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  The price of progress has varied greatly throughout history. Simplifications of human advancement like figure 1, which are often used to illustrate the great leap forward, miss all the action. The point is not that the figure is incorrect. It rightly shows that per capita growth in gross domestic product (GDP) was stagnant for millennia and took off in an extraordinary fashion around 1800. Thus, tracking progress purely in terms of average incomes leads one to conclusions like this one: “Modern humans first emerged about 100,000 years ago. For the next 99,800 years or so, nothing happened.… Then—just a couple of hundred years ago—people started getting richer. And richer and richer still. Per capita income, at least in the West, began to grow at the unprecedented rate of about three quarters of a percent per year. A couple of decades later, the same thing was happening around the world. Then it got even better.”11

  This standard narrative is unfortunate. Because of it, we often forget that during the extraordinary upward trend in growth that began in eighteenth-century England, millions of people were adjusting to change. And some had more cheerful stories than others. There were even those who would have been better off had mechanization not been allowed to progress. Figure 1 leads us to think that everyone living today must be better off than the previous generation, just as the generation born in 1800 must have seen staggering improvements in their living standards relative to those of their grandparents. Figure 1 also suggests that we were not very inventive before the eighteenth century. Otherwise, why would growth have been so slow? Yet a closer examination of preindustrial times reveals some pathbreaking inventions and ideas. And if we zoom into different episodes of progress, as this book will, we find that people fared very differently in the winds of change.

  The “takeoff” depicted in figure 1 began with the arrival of the mechanized factory. Italy could take some credit for its inception. Drawings of the silk-throwing machines that led to the first factories came from Piedmont through an episode of industrial espionage for which Thomas Lombe received a knighthood from the British government. But England was first to exploit machinery on a mass scale. Indeed, while the Industrial Revolution had its origins in silk production, its true beginnings were in the cotton industry. As the historian Eric Hobsbawm famously remarked, “Whoever says Industrial Revolution says cotton.”12 After the mechanization of cotton production, change begat change as a self-reinforcing cascade of progress created the modern world. As technology progressed in the early days of industrialization, however, living standards for many regressed. Our vocabulary bears witness to the changes that signify the century after 1750. Words like “factory,” “railroad,” “steam engine,” and “industry” first emerged then. But so did “working class,” “communism,” “strike,” “Luddite,” and “pauperism.” What began with the arrival of the first factories ended not only with the construction of the railroads, but also with the publication of the Communist Manifesto. Just as the Industrial Revolution was responsible for many revolutionary technologies, so it was responsible for many political revolutionaries along the way.13

  FIGURE 1: World Gross Domestic Product per Capita, 1–2008

  Source: J. Bolt, R. Inklaar, H. de Jong, and J. L. Van Zanden, 2018, “Rebasing ‘Maddison’: New Income Comparisons and the Shape of Long-Run Economic Development,” Maddison Project Working Paper 10, Maddison Project Database, version 2018.

  The point is not to downplay the significance of the British Industrial Revolution. It is rightly regarded as the main event in human history because it eventually allowed humanity to escape the life that Thomas Hobbes described as “nasty, brutish, and short.”14 Eventually was nonetheless a long time. The “Great Escape,” as the economist Angus Deaton has called it, didn’t immediately turn the cottage of the commoner into a Garden of Eden.15 During the early days of industrialization, the lives of many commoners got nastier,
more brutish, and shorter. Material standards and living conditions for the masses in Britain failed to improve before 1840. The poet William Blake’s phrase “dark, satanic mills” captures the long working hours in the factories and the hazardous conditions that embodied the industrialization process.16 In major industrial cities like Manchester and Glasgow, life expectancy at birth was some staggering ten years shorter than the national average. The wages that workers took home in industrial cities hardly compensated for the dirty and unhealthy conditions in which people lived and worked. Although output expanded, the gains from growth didn’t find their way into the pockets of ordinary people. Real wages were stagnant or even falling for some. The only thing workers saw expanding was the number of hours spent in the “dark, satanic mills.” The gains of progress overwhelmingly went to industrialists, who saw their rate of profit double. Consequently, the average amount of food consumed in Britain during the Industrial Revolution did not increase until the 1840s. The share of households with a surplus for nonessentials declined among low-wage agricultural laborers and factory workers over the first half of the nineteenth century. And poor nutrition meant that people grew shorter by the generation. These were the glorious decades in which modern growth began.17

  The cause of the living standards crisis in Britain was the downfall of the domestic system of production, which was gradually displaced by the mechanized factory. Artisan craftsmen were highly skilled and earned decent wages. But with the rise of the factory, one artisan after another saw his income vanish. And while new jobs were created in the factories, spinning machines were specifically designed for children, who could do the job for a fraction of the cost of adults and thus became a growing share of the workforce. They were the robots of the Industrial Revolution. Besides working for very little, they did not have any bargaining power and were easy to control.18

  As the old artisanal skills were made obsolete by advances in mechanization, adult male workers lost out: the share of children workers rapidly expanded, reaching about half of the workforce employed in textiles during the 1830s. The social costs inflicted upon the workforce—including vanishing incomes, deteriorating health and nutrition, forced occupational and geographical migration, and in some cases unemployment—were not negligible. Not to mention the suffering of children. In an interview, Robert Blincoe, a former child laborer, stated that he would rather have his children deported to Australia than let them experience life working in the factories.19 But from a purely economic point of view, adult artisans were without question the prime victims of industrialization. And there were many of them. As one leading scholar of the Industrial Revolution, David Landes, writes, “If mechanization opened new vistas of comfort and prosperity for all men, it also destroyed the livelihood of some and left others to vegetate in the backwaters of the stream of progress.… The victims of the Industrial Revolution numbered in the hundreds of thousands or even millions.”20

  Historians have puzzled over why ordinary English people would voluntarily agree to take part in an industrialization process that reduced their living standards. The simple answer is that they didn’t. British governments at times clashed with workmen raging against the machine. But their efforts were unsuccessful, as British governments took an increasingly stern view of anything that might diminish England’s competitive position in trade. All the Luddites achieved during the risings of 1811–16 is prompting the government to deploy an even larger army against them: the twelve thousand troops sent to resolve the machinery riots amounted to more people than the army Wellington took into the Peninsular War against Napoleon in 1808.

  As we shall see, before the late nineteenth century, resistance to technologies that threatened workers’ skills was the rule rather than the exception. While much commentary tends to focus on the Luddite riots, they were just part of a long wave of riots that swept across Europe and China. And the history of opposition to labor-replacing technologies goes back much further. Vespasian, the emperor of Rome in 69–79, refused to adopt machinery for transporting columns to the Capitoline Hill due to employment concerns. And in 1589, Elizabeth I famously refused to grant William Lee a patent for his stocking-frame knitting machine, fearing unemployment as a result of the technological advance. The gig mill, which saved considerable amounts of labor, had been prohibited in Britain in 1551. And elsewhere in Europe opposition was just as fierce. Many European cities banned automatic looms in the seventeenth century. Why? Where they were adopted (for example, in the city of Leiden), riots followed. The ruling classes feared that angry workers like those in Leiden would start to rebel against the government. And this concern was by no means just European. One reason why China was so late to industrialize, economic historians have argued, is that resistance to technologies that threatened workers’ skills persisted up until the closing decades of the nineteenth century, when imported sewing machines were destroyed by native workers. In fact, the British government was the first to side with the pioneers of industry rather than rebelling workers, providing one explanation for why Britain was the first country to industrialize.21

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  Back in 2012, Bill Gates took note of what has been called the paradox of our age: “Innovation is faster than ever before … yet Americans are more pessimistic about the future.”22 Indeed, according to the Pew Research Center, just over a third of Americans still believe that their children will be better off financially than they were.23 If the past few decades are any guide to the future, some people surely have much to be pessimistic about. Only half of Americans born in 1980 are economically better off than their parents, compared to 90 percent of those born in 1940.24 Despite this fact, slogans like “the greatest country on earth” continued to be the norm in presidential election campaigns. It was only in 2016 that the Republican presidential candidate won with the slogan “Make America Great Again.” At last a candidate spoke the truth—or so it must have felt in those parts of the country where opportunities had long since faded.

  As the Industrial Revolution illustrates, the Gates paradox is not really a paradox. Like in the early days of industrialization, workers today are no longer reaping the gains of progress. Worse, many have been left behind in the backwaters of progress. In the same way that opportunity dried up for middle-income artisans as a consequence of the industrialization process, the age of automation has meant diminishing opportunities for the American middle class. Like the victims of the early factories, many Americans have adjusted to the computerization of work by unwillingly shifting into lower-paying jobs or have failed to adjust and dropped out of the workforce completely. And similar to the victims of the factories, the losers to automation have primarily been men in the prime of life. Up until the 1980s, manufacturing jobs allowed ordinary working men to attain a middle-class lifestyle without going to college. As employment opportunities in manufacturing receded, a path of upward mobility was closed to many citizens.25

  What’s more, the adverse consequences of automation have so far primarily been a local phenomenon. Focusing too closely on national statistics disregards the fact that if you put one hand in the freezer and the other on the stove, you should feel quite comfortable on average. The same was true of the Industrial Revolution. While the local cloth industry in Northamptonshire was left in ruins, factories were almost unheard of in 1800 in the pastoral areas of southern England, where Jane Austen resided. This time around, the social and economic fabric has been torn apart in old manufacturing cities, where automation has deprived middle-aged men of opportunity. Communities that have seen manufacturing jobs vanish, due either to automation or globalization, have endured persistent increases in joblessness. They have also seen public services deteriorate, greater increases in property crime and violent crime, and worse health outcomes. They have seen mortality rates increase due to suicide and alcohol-related liver disease. They have seen marriage rates collapse, leaving more children in single-parent households, with dismal future prospects. Rates of social mobility are si
gnificantly lower in places where middle-class jobs have evaporated.26 And where jobs have disappeared, people have become more likely to vote for populist candidates. Indeed, studies have shown that both in America and in Europe, the appeal of populism has been greater where jobs have become more exposed to automation.27 Just like the days of the Industrial Revolution, the losers to technology are demanding change.

  We should have seen it coming. In 1965, when the first electronic computers entered offices, Eric Hoffer warned in the New York Times that “a skilled population deprived of its sense and usefulness would be the ideal setup for an American Hitler.”28 Perhaps somewhat ironically, Hitler and his government were well aware of the disruptive force of labor-replacing technology. His appointment as chancellor of Germany on January 30, 1933, heralded the return of preindustrial policies, which sought to restrict the use of machinery. In Danzig, where the Nazi Party won over 50 percent of the votes that year, such efforts became a major priority. To deal with the issue of technological unemployment, the Senate decreed that machinery would not be installed in factories without special permission of the government. Failure to comply would lead to heavy penalties or even being forced to shut down by the government.29 In August 1933, Alfred von Hodenberg, leader of the Nazi Labor Front, made clear that machines would not be allowed to threaten workers’ jobs in the future. “Never again,” he reassured the public, “must the worker be replaced by a machine.”30