Carl Frey is a superstar professor at Oxford University partly due to his previous book, “The Technology Trap” (2019), which was the ‘FT Book of the Year’. His latest big book, ‘How Progress Ends’, is arguably the most important book published in 2025. The book focuses on the comparative history of economic policy & performance of the big economies over the past 2000 years. By doing so, it sheds light on the most pressing economic questions of our time eg. What is America’s future? What lies in store for China? Will AI take us forward or condemn us to stagnation? What of countries like India which combine democracy with crony capitalism, free markets and state control? We spent the whole weekend reading the book and watching podcasts – such as the LSE webinar (which you can find by clicking on the link to the LSE blog given above) – built around the book. Here are the four big things we learned from the book.
Frey’s key point is that all economic progress hinges on technological progress. Countries which have access to modern tech and are able to put it to productive use grow faster. If the country is already developed then to access modern tech which can move the needle, the said country has to pierce the technology frontier and come up with breakthrough innovations. This is where America has succeeded time and time again over the past 150 years and this is where Europe has failed over the past 40 years. For countries like India, which are NOT on the tech frontier, there is no need to come up with cutting edge tech. Instead, such countries can move forward rapidly by harnessing pre-existing technologies. A corollary is that for countries like India to try to come up with cutting edge tech is a waste of money and human capital.
Frey’s second point is that countries which have decentralised economies find it easier to come up with tech breakthroughs. Quoting from Phil Bell’s blog: “The UK was the most inventive country from the mid-18th century until 1825, after which, according to Frey, the US took up that mantle. The central driver of US dynamism was its decentralised federal system, which is now under threat due to increases in corporate lobbying and vested interests stifling innovation. However, Frey’s prime example of a decentralised innovation engine is the Defense Advanced Research Projects Agency (DARPA). Notably, DARPA was a government organisation set up in response to Sputnik which gave scientists a large degree of independence to test out ideas and enabled the development of the internet.”
On this point of ‘centralisation vs decentralisation’, Bernard Marr’s piece in Forbes brings out the central challenge for most economies, namely, there is no ONE FORMULA which works all the time: “The heart of the problem lies in how societies transition between two distinct phases of innovation. Frey describes an early “exploration” phase, during which new ideas emerge in a highly decentralized environment where experimentation thrives. Successful economies later shift into “exploitation,” scaling technologies, cutting costs, and consolidating power. “Exploration thrives on decentralization,” he said. “Exploitation thrives on concentration and consolidation. But then, to get onto the next cycle, you need decentralization again. And that transition is very hard to make.””
Frey’s third point is that both Trump’s America and Xi’s China are likely to encounter serious issues with their technological progress – and hence economic growth – in the years ahead as their leaders centralise power. Quoting from Halil İbrahim İzgi’s article: “The United States, he argues, now faces a crisis of innovation; China, far removed from liberal orthodoxy, has built a system that delivers sustained growth. Neither model is presented as exemplary. Instead, both remind us that institutional design is never final and that societies revisit their choices cyclically, sometimes reversing course entirely – as with the repeated privatization and nationalization of Britain’s railways.”
Quoting from Bernard Marr’s piece: “Historically, the United States led because it encouraged competition and flexible institutions. Government funding supported exploration while antitrust actions opened markets for new entrants. This allowed companies like Microsoft and a generation of internet innovators to emerge. Japan excelled at refining and scaling existing technologies; yet, its highly centralized corporate system left it poorly positioned for the software revolution.
Frey is concerned that America is losing this advantage. “The autonomy of American universities is being reduced, funding through the National Science Foundation cut, clampdown on access to talent and immigration,” he said. “I am much more worried about America than I was when I wrote the book.” Meanwhile, China is centralising power and prioritising national security over growth, which also risks stagnation. The result is an uneasy race where neither side may maintain the conditions for sustained innovation.”
Finally, with regards to AI, Frey frames it again in the context of ‘centralisation vs decentralisation’ construct given above i.e. AI will take an economy forward only if it is used in a decentralised manner to generate progress beyond mere automation. Bernard Marr writes: “Many organizations are using AI primarily for process automation and cost-cutting. Frey believes this will not deliver transformative growth. “If AI means we do email and spreadsheets a bit more efficiently and ease the way we book travel, the transformation is not going to be on par with electricity or the internal combustion engine,” he said. True prosperity comes from creating new industries and doing previously inconceivable things. Leaders should encourage their teams to experiment with AI to create new products and services, not just streamline existing ones.
This requires giving employees at all levels the autonomy to test and implement AI solutions. “The people that do the experimentation understand best themselves what the technology can and cannot be used for,” Frey explained. Companies that reward experimentation and decentralize decision-making are better placed to ride the AI wave.”
Companies or countries which seek to use AI to centralise power are likely to encounter economic stagnation. Halil İbrahim İzgi writes about Frey: “Adaptation to AI, he suggests, depends on institutional flexibility and cultural disposition. Some societies will integrate it rapidly, while others will do so more hesitantly, and outcomes will vary accordingly.”
If you are looking for thought provoking Christmas read and if you like big books, then you will enjoy Carl Frey’s tome.
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