Book review: US economists ponder ways to make tech serve the people

In Power and Progress, a new and timely book, influential US economists explain how the powerful – be they feudal overlords or modern tech leaders – have always peddled a narrative that what’s good for them is also good for the rest of us.

The majority of technology leaders usually say that although there are downsides, AI – and tech in general – will bring widespread economic and societal benefits.

Yes, some disruption is possible, for example, in jobs lost, but it’s unavoidable, they say, as we transition into a sort of digital utopia. We’re lucky to witness the transformation live, they rush to add.

Others argue this is delusional and dangerous because what the workers will get is dystopia. Automation – we now call it “digital solutions” – can push millions of workers out of their jobs and, indeed, their livelihoods.

Unless they organize and apply pressure on the bigwigs – only then real progress will become possible. This is the main idea of a gigantic new book Power and Progress: Our Thousand Year Struggle Over Technology and Prosperity, written by Daron Acemoglu and Simon Johnson.

Work hard, die young

Acemoglu – often mentioned as a shoo-in for the Nobel Prize – and Johnson are both economists at the left-leaning Massachusetts Institute of Technology. Perhaps that is why it’s unsurprising to see them claim that technological progress is a mixed bag.

It doesn’t mean they’re wrong. Far from it, Power and Progress manages to convince. It doesn’t turn you into a Marxist but it sure makes you think that Karl Marx wasn’t really so wrong, at least in claiming that those who have power define the narrative.

In essence, the authors of this formidable 560-page tome eloquently walk the reader through the ages and show that technology alone should not be equated with progress – even if the tech visionaries today want us to believe that the gains have been almost automatic and guaranteed.

In every chapter, Acemoglu and Johnson smoothly remind us that in the eyes of the corporate bigwigs nothing and nobody should stand in the way of progress. But in the end, the evolution of agricultural technologies or the Industrial Revolution only enriched and empowered small elites.

Industrialization made some people very rich but most – the ones who actually worked – lived shorter, less healthy, and more brutal lives.

To seek profits is not a crime, of course. But this book is a much-need reminder that if making more money and gaining more power to make even more money is your only goal, any kind of social inclusion and a more equal, harmonious society will be impossible.

That’s what has been happening over the ages. Sure, a lot of important work was done in coal mines or cotton factories in Britain of the 19th century, and new inventions like steam that powered mills helped.

But such automated working conditions during the Industrial Revolution were truly draconian. Children as young as six were suffering, and their parents didn’t really see much improvement in their real incomes – besides, they were now crowded in dense, polluted cities where infectious diseases ruled the streets.

In short, yes, industrialization made some people very rich but most – the ones who actually worked – lived shorter, less healthy, and more brutal lives, the authors of the book point out. Industry was growing but the benefits were shared only within a very narrow circle.

Losing again

It’s important to note that our lives are now infinitely richer and more comfortable. Many would quite rightly say that thanks to precisely technological advances even the poor enjoy much higher living standards today than 150 years ago.

Our lives are longer and healthier, sure. But that’s not the whole story. “Technology’s bias against working people is always a choice,” Acemoglu and Johnson write, and the people of Britain, and then elsewhere, chose to fight their way to real progress through political and economic reforms.

“There was nothing automatic about any of the improvements that ushered in a broader sharing of productivity gains and the cleanup of cities,” the book says.

“Most people around the globe today are better off than our ancestors because citizens and workers in earlier industrial societies organized, challenged elite-dominated choices about technology and work conditions, and forced ways of sharing the gains from technical improvements more equitably.”

It wasn’t only about wages – workers also organized in order to get more bargaining power with employers. In 1871, trade unions became fully legal in Britain. Then, broader political representation followed. The New Deal reforms in the United States, initiated by president Franklin Delano Roosevelt, injected even more justice into the economy.

In other words, the misunderstood “luddites” consistently pushed for change and succeeded in bolstering countervailing powers from workers and government regulation. It really was possible to implement automation in many industries without costing millions of workers their jobs.

What has all this to do with tech – at least with what we imagine is tech today? Well, the thing is we, the people, are taking a beating again, and the so-called tech visionaries are a big part of this losing game, Acemoglu and Johnson say.

The computer joined the game in the 1960s and 1970s. In the beginning, the nerds reigned: they distrusted large companies and big businesses, claiming that information should be free if humanity wants it to lay the foundations of even stronger shared prosperity.

Where’s that productivity?

“Something very different transpired, and digital technologies became the graveyard of shared prosperity. <...> They automated work and disadvantaged labor vis-à-vis capital and lower-skilled workers vis-à-vis those with college or postgraduate degrees,” Acemoglu and Johnson say.

Globalization? Yes. But technology became a victim of a new vision, formulated by Friedrich Hayek, George Stigler and Milton Friedman, the three anti-regulation apostles from the University of Chicago.

These economists maintained that maximizing profits and shareholder values was for the common good because it would translate to spectacular productivity growth, trickling from top to bottom.

Yes, the good old “trickle-down” effect – a stubborn and now-demolished theory about how wealth spreads from the rich to everyone else. US president Ronald Reagan was a big fan of the idea – unsurprisingly, the wealthy were big fans of his, too. Greed became good.

But when it came down to ordinary workers, the balance between them and managers has been altered, even though sharing of productivity gains between companies and workers was a key pillar of broad-based prosperity after 1945.

The consequences of this new approach against government interventions and regulation were sweeping when it comes to Big Tech. The five largest US tech giants – Google, Meta, Apple, Amazon, and Microsoft – are jointly worth about one-fifth of US GDP.

Is that so bad? Let’s see. These corporations have purchased scores of start-ups, thus thwarting potential rivals and reducing competition for workers – that means they don’t have to offer higher wages. The executives themselves enjoy ever more lavish salaries and bonuses.

Again, maybe everyone is getting richer? No, inequality is rising, and computers have automated work rather than empowered workers and enriched their work. Plus, these choices then became self-reinforcing, for automation reduced the number of unionized workers, delivering a blow to worker organizations.

Finally, what about the productivity bandwagon? The fruits of the digital revolution are hard to see, unfortunately – already in 1987, Nobel Prize winner Robert Solow wrote: “You can see the computer age everywhere but in the productivity statistics.”

Indeed if one measured total factor productivity (TFP), US average growth since 1980 has been less than 0.7%, compared to TFP growth of around 2.2% between the 1940s and 1970s. The difference is remarkable – does it mean that despite all the techno-optimism, research, and innovation the economy is not getting the expected returns?

Data, data, data

Now, the artificial intelligence (AI) boom comes along. Acemoglu and Johnson probably saw the whole frenzy in the process of writing this book, and, of course, touched upon the hot topic of the day.

We’ve all heard thousands of times how AI will change how we live, work, sleep (and probably use the facilities) forever. As our chief editor pointed out back in June, it really seems like a sort of a gold rush – we keep hearing we won’t even have to work anymore soon!

Right. Let’s place a fly in the ointment, shall we? First, what if AI disrupts the labor market even more and redistributes power and prosperity away from ordinary people towards those who already control our data?

Less work? Let’s just quote Alberto Romero, an AI scientist who became disillusioned with the industry and left it in 2021: “If you work in AI you are most likely collecting data, cleaning data, labeling data, splitting data, training with data, evaluating with data. Data, data, data. All for a model to say: It’s a cat.”

This is the type of work millions already do – and they’re not paid well. For instance, OpenAI, the creator of the viral ChatGPT bot, used Kenyan workers on less than $2 per hour, TIME magazine reported back in January.

“When all is said and done, the newfound enthusiasm about AI seems an intensification of the same optimism about technology, regardless of whether it focuses on the automation, surveillance, and disempowerment of ordinary people that had already engulfed the digital world,” Johnson and Acemoglu argue.

“Yet these concerns are not taken seriously by most tech leaders. We are continuously told that AI will bring good. If it creates disruptions, those problems are short-term, inevitable, and easily rectified. If it is creating losers, the solution is more AI.”

It’s not all doom and gloom, thankfully. In the closing chapter, the authors provide a useful list of steps countries – at least democratic ones – should take if they want to share the proceeds of the new tech wave more fairly.

None of the steps is rocket science. Expose the narratives and myths propagated by this huge industry and its acolytes in politics and the media; strengthen civil society and labor organizations which are now weakened after decades of neoliberal solutions; and hear out ideas from truly non-partisan think tanks about how digital technology can be saved from naked profiteering.

One can only hope – as do Acemoglu and Johnson – that humanity will one day speak of “machine usefulness” and not of “machine intelligence.” That’s because machines are meant to be tools that complement our natural talents – not our replacements.