THE TECHNOLOGY TRAP: CAPITAL, LABOR AND POWER IN THE AGE OF AUTOMATION
By Carl Benedikt Frey
Princeton University Press, 2019, pp. 480, $29.95
We are now well into the ‘Fourth Industrial Revolution’ which is bringing astonishing advances in many fields—information technology, life-sciences, materials, intelligent machines and a fusion of machines, information and biological systems. With gene editing, we now even have the ability to modify or even engineer new life forms. Whether all these possibilities will lead to empowerment and emancipation of many more people or to more exploitation and inequality is one of the central questions that face humanity. To answer this, Carl Frey, who directs the Future of Work Programme at the Oxford Martin School, turns to history, specifically to the preceding industrial revolutions.
The book serves as an important reminder that while technological change may benefit many over the long run, ‘short run’ adjustment costs can represent a lifetime for the majority of workers. The first Industrial Revolution transformed the world by the mechanization of manufacturing and agriculture. This resulted in an extraordinary surge of wealth and living standards in Britain, Western Europe and America. However, very few of those who lived through this massive economic upheaval were beneficiaries. The machine-owning industrialists grew, ‘rich on the misery of the mass of wage earners’. The introduction of water frames, carding machines and spinning Jennies eradicated many jobs, sucked child-labour into the workforce and suppressed wages. Handloom weavers, once known as labour’s aristocrats, became the tragic losers. ‘Three generations of working Englishmen were made worse off as technological creativity was allowed to thrive. The full benefits of the Industrial Revolution took more than a century to be realised.’ (Frey fails to account for the millions of weavers and artisans thrown out of work in countries like India as Britain brutally colonized them. If these are factored in, the arithmetic is even more skewed.)
Early factories were horrible, dangerous, places to work in. Life expectancy in Manchester in 1850 was 32 years, well below the national average of 41 years. Men were on average shorter in 1850 than they were in 1760. This resulted in a backlash, ‘the Luddite movement’, as workers mutinied and smashed machines between 1811 and1816. One reason that Britain pulled ahead of the rest of Europe is that it was more brutal in suppressing dissent. In 1769 legislation was passed making the destruction of machinery punishable by death. In 1812 and 1813 more than 30 Luddites were hung. Many other countries were slower in embracing labour-replacing machines because of their disruptive force. In these countries including France and Germany, medieval guilds successfully resisted technologies that they perceived as threatening their skills and wages. This is why Britain became so economically dominant.
The central concern that runs through The Technology Trap is that, unless we are very careful, our latest technological revolution may well turn out to be a tragic rerun of the Industrial Revolution. AI in particular is likely to result in a productivity surge, just as we saw in the Industrial Revolution. But the risk that the gains will be unequally distributed and will take a long time to benefit all is very high. The short run can be a lifetime for some, with potentially dire social and political consequences.
Frey argues that the reason we downplay the human cost of the First Industrial Revolution is because of a very different and much happier experience of automation experienced in 20th-century America (the second and third industrial revolutions.) The most significant difference between the two eras was that technology was primarily ‘labour-enabling’ during the American century, whereas it had been mostly ‘labour-replacing’ in earlier centuries. It is true that some jobs, such as lamplighters and elevator operators, were eliminated altogether. But electricity and the internal combustion engine, the two main technologies of the 20th century, helped improve material wellbeing for the majority of the working people. The first three-quarters of the 20th century are seen as the ‘greatest levelling of all time’. Agricultural productivity was transformed by machinery freeing millions of workers from the land. The mechanization of the household liberated millions of women from time-consuming domestic chores and enabled them to enter the formal workforce and increase household incomes. The introduction of running water, electricity, refrigerators and washing machines cut the workweek of the housewife by a massive 42 hours between 1900 and 1966. Technology had the added benefit of making work less hazardous and physically demanding. It also led to better paying jobs. Between 1870 and 1980 hourly pay kept track with labour productivity. Higher unionization resulted in distribution of wealth and low inequality. The expansion of secondary education enabled workers to perform higher value added jobs. One of the great achievements of the 20th century was the creation of a prosperous middle class.
Alarmingly, in recent decades, this virtuous upwards circle has been thrown into reverse, and the middle class is shrinking. Rather than globalization or immigration as the primary culprit, Frey points to the computer revolution. ‘The computer revolution more closely resembles the experience of the Industrial Revolution,’ he writes. Of Americans born in 1980 only half are better off than their parents. The comparable figure for 1940 is 90 per cent. The number of robots in the US increased by 50 per cent between 2008 and 2016, each of them replacing about 3.3 jobs. He highlights a correlation between those States with the highest robot density and those States that unexpectedly swung behind Donald Trump. ‘The trajectories of per capita output and people’s wages look exceedingly similar. In America, labour productivity has grown eight times faster than hourly compensation since 1979. Even as the American economy has become much more productive, real wages have been stagnant, and more people are out of work; consequently the labour share of income has fallen. Corporate profits have swept up an ever-greater share of national income while the share going to workers has rarely been smaller.’ ‘The great reversal’ has seen the percentage of men aged between 25 and 54 who go to work in the morning plummet since the new millennium while opportunities for high school graduates (those without a university degree) have diminished.
However, the book doesn’t adequately explore the reasons for the reversal. Why are we now looking at a tendency towards labour-replacing technologies when we had a proliferation of labour-enabling ones for nearly a century? The author’s premise is simplistic—whether workers lose their job to robots ultimately depends on ‘the societal distribution of political power’. What would have made it more robust is an explanation of the political economy of inequality since the 1980s—there is very little mention of Margaret Thatcher and Ronald Reagan and strict anti-union legislation, corporate governance and declining rates of income and corporate taxation. Also, the perverse idea that firms are built to single-mindedly generate returns for shareholders which results in a vast imbalance of power between capital and labour. These factors point to why workers are not benefiting from an age of automation.
The second weakness is that The Technology Trap focuses on an Anglo-American world. It doesn’t cover the perspective from China or India or Japan where robots are seen as increasing productivity of an ageing population. Frey shies away from exploring a new form of colonialism this time by dominant technology companies rather than countries. What is in store for Africa, which is just beginning a slow rise out of colonialism and poverty? Does autocratic China have a significant advantage when it comes to harnessing AI or gene editing compared to democracies and what could this mean?
Gripping as this book is, it leaves you disappointed when it comes to potential solutions. Frey is sceptical about ideas like Universal Basic Income and prefers life-long learning accounts, wage insurance and tax credits. His point on strengthening education and human capital is compelling.
Frey’s most important conclusion is that technology is not destiny. Neo-Luddite citizens and voters may yet stymie the rise of the robots. ‘In a world where technology creates few jobs and enormous wealth, the challenge is a distributional one,’ The Technology Trap is a reminder that the future of work depends on policy choices. It is well worth reading.
Ravi Venkatesan is the former Chairman of Microsoft India and Bank of Baroda.