Two weeks ago we began Three Longs & Shorts with a piece by the legendary VC Marc Andreessen in which he exhorted the world to stop listening to those who talk about the pernicious effects of technology and listen to techno-optimists like him (see https://marcellus.in/story/the-techno-optimist-manifesto/). In their book, “Power and Progress”, Acemoglu & Johnson, eminent economists both from MIT, take a very different point of view. As John Naughton writes for The Guardian, “One of the many useful things about this formidable (560-page) tome is its demolition of the tech narrative’s comforting equation of technology with “progress”. Of course the fact that our lives are infinitely richer and more comfortable than those of the feudal serfs we would have been in the middle ages owes much to technological advances. Even the poor in western societies enjoy much higher living standards today than three centuries ago, and live healthier, longer lives.
But a study of the past 1,000 years of human development, Acemoglu and Johnson argue, shows that “the broad-based prosperity of the past was not the result of any automatic, guaranteed gains of technological progress… Most people around the globe today are better off than our ancestors because citizens and workers in earlier industrial societies organised, challenged elite-dominated choices about technology and work conditions, and forced ways of sharing the gains from technical improvements more equitably.””
Acemoglu & Johnson highlight in the book is that the default setting of economies usually is such that technological advancements benefit a tiny elite. As Mr Naughton says in this review, “They find that successive developments “tended to enrich and empower small elites while generating few benefits for agricultural workers: peasants lacked political and social power, and the path of technology followed the vision of a narrow elite.”
A similar moral is extracted from their reinterpretation of the Industrial Revolution. This focuses on the emergence of a newly emboldened middle class of entrepreneurs and businessmen whose vision rarely included any ideas of social inclusion and who were obsessed with the possibilities of steam-driven automation for increasing profits and reducing costs.”
In fact as Dean Baker writes in his review of this thought provoking book, through the Middle Ages and the Industrial Revolution the elite utilised the proceeds from tech improvements in an unusually ostentatious manner: “One of the points it makes, which was underappreciated (at least by me), was the extent to which the gains in this period were siphoned off by the church. The huge cathedrals and monasteries constructed in this period absorbed a huge chunk of the surplus produced in agriculture. This both depressed living standards and prevented resources from going to investments that would increase productivity… In particular, the book points out that the early years of the industrial revolution in 19th century England were associated with a deterioration in living standards for large segments of the working class. Factory workers, and especially children, were forced to work longer hours under worse conditions than ever would have been the case in agriculture. In addition, the living conditions in cities were far more unhealthy than what they faced in the countryside.”
You can substitute marque sports team acquisitions instead of cathedrals in case you are searching for the modern-day analogy for vanity spending by the super-rich.
Did the rising tide of tech progress not lift all boats? How did prosperity spread in the West? Acemoglu & Johnson say that the aftermath of World War II played a key role in spreading the benefits of tech until Reagan & Thatcher arrived to skew matters in favour of the elite: “The shock of the second world war led to a brief interruption in the inexorable trend of continuous technological development combined with increasing social exclusion and inequality. And the postwar years saw the rise of social democratic regimes focused on Keynesian economics, welfare states and shared prosperity. But all of this changed in the 1970s with the neoliberal turn and the subsequent evolution of the democracies we have today, in which enfeebled governments pay obeisance to giant corporations – more powerful and profitable than anything since the East India Company. These create astonishing wealth for a tiny elite (not to mention lavish salaries and bonuses for their executives) while the real incomes of ordinary people have remained stagnant, precarity rules and inequality returning to pre-1914 levels.”
So what is to be done to democratise the benefits of technological progress? Here is Mr Naughton’s summary of the prescription laid down by Acemoglu & Robinson: “There are three things that need to be done by a modern progressive movement. First, the technology-equals-progress narrative has to be challenged and exposed for what it is: a convenient myth propagated by a huge industry and its acolytes in government, the media and (occasionally) academia. The second is the need to cultivate and foster countervailing powers – which critically should include civil society organisations, activists and contemporary versions of trade unions. And finally, there is a need for progressive, technically informed policy proposals, and the fostering of thinktanks and other institutions that can supply a steady flow of ideas about how digital technology can be repurposed for human flourishing rather than exclusively for private profit.
None of this is rocket science. It can be done. And it needs to be done if liberal democracies are to survive the next wave of technological evolution and the catastrophic acceleration of inequality that it will bring.”
Courtesy the brilliance of India’s tech ecosystem in Bangalore and their creation of the India Stack, India is doing a better job of the above than the United States.
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Note: The above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. The information provided is intended for educational purposes only. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India (SEBI) and is also an FME (Non-Retail) with the International Financial Services Centres Authority (IFSCA) as a provider of Portfolio Management Services. Additionally, Marcellus is also registered with US Securities and Exchange Commission (“US SEC”) as an Investment Advisor.
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