By Daron Acemoglu and Simon Johnson
Casualties of Progress
The 1842 Report from the Royal Commission of Inquiry into Children’s Employment was a shocker. It became increasingly evident to the Victorians that although industrialization had made some people very rich, most workers lived shorter, less healthy, and more brutal lives than had been the case before industry began to develop.
Jan De Vries pointed out that the Industrial Revolution was very much an “industrious revolution”, in the sense that first the British, and then everyone else, began to work much harder. When employers are powerful and labor is not, productivity gains are not shared with workers – and profits are higher.
Longer and less autonomous working days and stagnant real incomes were not the only fallout from early industrialization. The social bias of technology also had a broader impoverishing effect. Industrialization also brought a great deal of pollution. Pollution and infectious diseases created deadly threat for city dwellers.
In the second phase of industrialization in the second half of the nineteenth century, wages started growing steadily and working conditions also improve. Public health improved dramatically as well.
The productivity bandwagon needs two preconditions to operate: improvements in worker marginal productivity and sufficient bargaining power for labor. Something else (on top of British industry productivity improvements) helped move to shared prosperity: new innovation from the other side of the Atlantic. The US was abundant in land and capital, but scarce in labor, especially skilled labor.
Eli Whitney’s focus on interchangeable parts, which strove to build standard pieces that could be combined in different ways, making it easier for unskilled workers to produce guns. Whitney aimed at building a “systems approach” combining specialized machinery and labor to increase efficiency.
As industry expanded, firms competed for market share and for workers. Workers began to obtain higher wages through collective bargaining. That was the culmination of a long process that had started at the beginning of the century and reached fruition only in 1871, when trade unions became fully legal. Countries made different choices on how to use the available technological know-how, with very distinct implications.
The Contested Path
The first WW, the time between and the second WW were hard times for Europe. It was after 1945 when next thirty years were called the glorious years. This growth had two critical building blocks: the direction of travel for new technology that generated not just cost savings through automation but also plenty new tasks, products, and opportunities; and institutional structure that bolstered countervailing powers from workers and government regulation.
The American path of technology strove to raise productivity to make better use of labor that was relatively in short supply. Between 1850 and 1910 the share of labor in value added in manufacturing and services increased from 46 to 53 percent.
Two interrelated changes intensified productivity and transformed American industry: electricity and the greater use of information, engineering, and planning in the production process. Electricity is particularly important because it is general purpose technology. The new communication devices made possible by electricity. With better communications, logistic and planning improved.
With the advent of electricity, factories became much more productive. Even more important was the reorganization of the factory thanks to flexible sequencing of machinery. Each equipment could now have its own, dedicated local power source.
The reorganization of manufacturing enabled by white-collar workers created relatively high-paying jobs for blue-collar workers.
The American path of technology build new systems and machinery, increasing efficiency and in the process augmenting the capabilities of both skilled and unskilled labor. An important source of productivity gains was training. The link between advanced machinery and new skills training as a foundation for creating novel opportunities and increased demand for workers would turn out to be critical in the postwar era as well.
Welfare capitalism started to get some traction only after Great Depression, and initially far away from US. Before 1920 Sweden was predominantly agricultural. Swedish Social Democratic Workers’ Party (SAP) started to campaign for a robust policy response (to depression) that had both a macroeconomic leg (greater government spending, higher wages in industry to prop up demand, and expansionary monetary policy by leaving the gold standard) and an institutional leg (providing foundations for consistent sharing of profits between labor and capital, redistribution via taxation, and social insurance programs).
In a famous meeting in the resort town of Saltsjobaden in 1938, a deal was struck with a significant fraction of business community, agreeing on the basic ingredients of the Scandinavian social democratic system. The most important elements were industry-level wage setting, ensuring that profits and outputs increases were shared with workers, and significant expansion of redistributive and social insurance programs, along with government regulations.
In US FDR administration was responsible for minimal wages and Wagner Act of 1935, which recognized the right of workers to collectively organize. Inequality fell rapidly during and after WW II.
Demand for workers of all different skills continued to increase throughout the 1950s, 1960s, and early 1970s. in essence, technologies of the era created as many opportunities for workers as the ones they displaced. US education also expanded due to new skills demand. In Europe countries suffered from the war. But this was also time when state-run insurance programs were created, that protected people from “cradle to grave”. Japan also created one.
Digital Damage
The beginnings of the computer revolution can be found on the ninth floor of MIT’s Tech Square building in 1959-60.
Digital technologies became the graveyard of shared prosperity. Wage growth slowed down, the labor share of national income declined sharply, and wage inequality surged starting around 1980. Digital technologies automated work and disadvantaged labor vis-à-vis capital and lower-skilled workers vis-à-vis those with college or postgraduate degrees.
Throughout most of the twentieth century, about 67-70 percent of national income went to workers, and the rest went to capital. By 2019, labor’s share of national income had dropped to under 60 percent. In Germany it dropped from 70 in 1980 to around 60 percent in 2015.
Shared prosperity was not destroyed by automation per se, but by an unbalanced technology portfolio prioritizing automation and ignoring the creation of new tasks for workers. Technology does not have a preordained direction, and nothing about it is inevitable.
By the 1980s, the view that what was good for business, or even large corporations, was good for the country had become commonplace. Ronald Reagan created term “trickle-down economics”.
The idea that unregulated markets work in the interest of the nation and the common good became the basis for a new approach to public policy. George Stigler and Milton Friedman economic views were based on Hayek’s, but they went even further. We can talk about shareholder value revolution and profit as main goal of business.
The implications of the rapid growth of big businesses are wide-ranging. They are now enjoying greater market power, which they are exercising both to thwart innovation from rivals and to enrich their top executives and shareholders. They also spell trouble for the productivity bandwagon because they reduce competition for workers. They powerfully multiply inequality at the top by enriching their already-wealthy shareholders.
In 1947 Taft-Hartley Act weakened some of the pro-union provisions of the Wagner Act.
The transformation from the hacker ethic to corporate digital utopia was largely about following the money and social power. An elitist approach came to dominate almost the entire industry. In 1987, Nobel Prize winner Robert Solow wrote: “You can see the computer age everywhere but in the productivity statistic.” The bias of technology was very much a choice – and a socially constructed one.
Artificial Struggle
Whatever the exact definition of modern machine intelligence, it is clear that new digital algorithms are being applied widely to every domain of our lives.
To be automated by traditional software, a task needs to be “routine”, meaning that it must involve predictable steps that are implemented in a defined sequence. Routine tasks are performed repetitively, embedded in a predictable environment.
The ambition of AI is to expand automation to nonroutine tasks.
Instead of fixating on machine intelligence, we should ask how useful machines are to people, which is how we define machine usefulness (MU). Focusing on MU would guide us toward a more socially beneficial trajectory, especially for workers and citizens.
Many of the productive tasks performed by humans are a mixture of routine and more complex activities that involve social communication, problem solving, flexibility, and creativity. In such activities, humans draw on tacit knowledge and expertise.
Tasks that involve social and situational aspects of human cognition will continue to pose formidable challenges for machine intelligence.
Industry’s focus continues to be on extensive data collection and the automation of narrow tasks based on machine-learning techniques.
Monitoring enables employers to cut wages and get more work out of the workers.
We can distinguish four related but distinct ways in which digital technologies can be steered in the direction of MU, helping and empowering humans:
- First, machines and algorithms can increase worker productivity in tasks they are already performing.
- The second type of MU is even more important, the creation of new tasks for workers.
- The third contribution of machines to human capabilities may be even more relevant in the near future. Decision making is almost always constrained by accurate information. Filtering and the provision of useful information could be supported by machines.
- Fourth, digital technologies can create new platforms and markets.
The way in which even the most promising applications of human-machine complementarity are used is still dependent on market incentives, the vision and priorities of tech leaders, and countervailing powers.
We were already on our way to a two-tiered society long before the 2010s. With a heightened AI illusion, we are seeing this process accelerate.
Democracy Breaks
China has implemented prototypes of the social credit system from 2017. Digital censorship and propaganda meant that nationalism, unquestioning support for the government, and unwillingness to listen to critical news and opinions had become much more widespread among Chinese youths.
The use of digital tools to suppress dissent is not unique to China. Iran and Russia, among other dictatorships, have also used them to track and punish dissenters and stifle access to free information.
Democracy dies in darkness. But is also struggles under the light provided by modern AI. Data on the universe of AI start-ups in China show that government demand for monitoring technologies fundamentally transforms subsequent innovation. There is one aspect in which China has an advantage: data. Chinese researchers work with much larger quantities of data and without the privacy restrictions that often limit the type of data Western researchers can access.
AI-powered social media’s current path appears almost as pernicious for democracy and human rights as top-down internet censorship. Targeting revolutionized digital advertising, but as with many revolutions, there would be plenty of collateral damage. Google soon accelerated its data collection by offering a range of sophisticated free products, such as Gmail and Google Maps. Not to mention YouTube.
The notion of the “public sphere” proposed by the German philosopher Jurgen Habermas, captures some of the essential features of healthy democratic discourse. Habermas argued that the public sphere, defined as forums where individuals form new associations and discuss social issues and policy, is pivotal for democratic politics.
Imposing massive surveillance and data collection is not the only path of technological advance and limiting it does not mean banning technology. It was a matter of choice – choice by tech companies, AI researchers, and governments – that got us into our current predicament.
Social media platforms can work with and make money from a subscription model as well.
Redirecting Technology
The Gilded Age of the late nineteenth century was a period of rapid technological change and alarming inequalities in America, like today. Massive “trusts” and “the robber barons” were the main actors in that age. The US today would be a very different place if the economic and social conditions of the Gilded Age had endured. But a broad Progressive movement formed to oppose the trusts’ power and demand institutional change.
Progressivism was a bottom-up movement, full of diverse set of voices. They were responsible for the Sherman Antitrust Act in 1890 and the Tilman Act in 1907, that ban corporate contributions to federal candidates.
The Progressive movement provides a historical perspective on the three prongs of a critical formula necessary for escaping our current predicament.
- The first is altering the narrative and changing norms.
- The second is cultivating countervailing powers.
- The third prong is policy solutions.
Fossil-fuel emissions are first and foremost a technology problem. The three policy levers (carbon taxes, research subsidies and regulations), together with pressure from consumers and civil society, led to a boost both in innovations in renewables and much larger levels of production of solar panels and wind energy.
Debates on new technology ought to center not just on the brilliance of new products and algorithms but also on whether they are working for the people or against the people.
What is needed is the right institutional framework and incentives shaped by government policies, bolstered by a constructive narrative, to induce the private sector to move away from excessive automation and surveillance, and toward more worker-friendly technologies.
We cannot redirect technology without building new countervailing powers. We need strong worker organizations and more civil-society action (alone and together).
Collective action requires a large group of people acting together to achieve an objective. But there is always a free-rider dilemma.
Some complementary policies could include subsidies and support for more worker-friendly technologies, tax reform, worker-training programs, data-ownership and data-protection schemes, breaking up tech giants, and digital advertisement taxes. They can help initiate a major redirection of technology.
The current tax system of many industrialized economies encourages automation. So maybe we need to change it.
Instead of picking winners, redirecting technology is much more about identifying classes of technologies that have more socially beneficial consequences. Other policies that are not directly connected with technology redirection, but can be useful are wealth taxes and redistribution and strengthening the Social Safety Net. If more money is invested through education system independently of big corporate money, for better technologies, this could improve innovation of more human oriented technology.
Posted by gandatmadi46@yahoo.com