Big Tech and Its Discontents

Source: High-tech, Digital, Metal/Pixabay

In Power and Progress: Our Thousand-Year Struggle Over Technology and Prosperity, economists Daron Acemoglu and Simon Johnson argue that technological developments like indoor plumbing, electric lighting, washers, dryers, vacuum cleaners, and leaps forward in transportation, communications, and medicine made the lives of most people in the economically developed world dramatically more comfortable in the century leading up to about 1980. The spreading of similar conveniences to substantial segments of the populations of previously less developed countries in recent decades has had similarly positive impacts on the lives of additional hundreds of millions in Asia and elsewhere. However, new innovations arising in the last three or four decades have had a more mixed record of improving the quality of life of the majority of people in already developed countries like the U.S., according to the authors. The real incomes of the majority of Americans have failed to rise since 1980, and the rate of increase of real income for all but the top few percent has also slowed to a crawl.

Equally important, much of what the tech world labels as progress has made life harder, not easier, for quite a few. This includes the speeding up and intensification of electronic surveillance of the work process in many warehouse, service, and delivery jobs, the low return to effort and the absence of benefits for the rising number of gig workers, and the mixed blessing for quality of life that comes with the rapid obsolescence of consumer products that already seemed good enough, replaced by updated versions that require costly hardware purchases and acclimation to new operating systems with little compensation in functionality for most. It also includes the declining convenience of shopping and interactions with government, healthcare, and other providers, as service workers are replaced by user-unfriendly “self-checkout” systems and automated phone and online interactions.

And it includes the mountains of unsolicited text, email, and other advertising to which consumers are subjected based on the harvesting of their shopping and social media data by artificial intelligence algorithms. It includes undermining workers’ bargaining power by potential automation and the outsourcing that the past few decades of shipping, communications, and other technology changes have facilitated. Add to this, finally, the potential evaporation of once-anticipated returns on skills, as artificial intelligence gains the potential to perform many jobs more efficiently than people.

Most economists would once have asserted that technologies that are profitable for companies to bring to market must be improvements over whatever preceded them since profitability implies that inputs are being transformed into outputs of higher value to consumers. Profit should, textbooks said, be sufficient proof of efficiency gains. But in a world of imperfectly competitive markets, profitability can indicate gains accruing to companies’ owners and top managers without implying that employees, consumers, or others trying to navigate their way around fleets of Amazon delivery vans and dig their way out of heaps of styrofoam and bubble wrap are also net winners.

Among the many reasons why the profitability of companies doesn’t always indicate a more productive and efficient economy is that the anemic anti-trust enforcement until recently and massive first-mover advantages for tech-based companies gave them both monopoly power with which to elbow aside potential competitors and monopsony power with which to attract and keep workers without having to share earnings growth with them. An example of the intersection of monopoly power with tech is provided by companies able to monitor the sales prices of competitors closely, temporarily lower their own prices until smaller competitors are driven from business, then raise their price to more than make up for the short-run loss on a given product line, even automating such practices through implementation by pricing algorithms. Old-fashioned buying out of competitors also does the job, as long as anti-trust watchdogs keep napping.

Discussing the effects of technological change on standards of living over the centuries, Acemoglu and Robinson argue that the balance of power and influence in societies has played at least as important a part as gains have in practical know-how in determining who gains from technological change. The capturing of most gains from the erection of medieval windmills in Europe by the minority that owned most land and mills, the concentration of benefits from the invention of the cotton gin in the hands of plantation owners, and the lack of improvements in living standards for workers in the early decades of Britain’s industrial revolution are among their examples of technological improvements that left ordinary people either less or no better off while enriching a few. Mass gains in quality of life in industrialized countries between the 1940s and 1970s were, they argue, as much a function of a shift towards policies supportive of collective bargaining, expanded educational opportunities, increased access to home ownership, and expanded social insurance as they were of productivity-enhancing technologies that automatically lifted most boats since more could be produced with given amounts of labor time.

On the history of technology and well-being from the Gilded Age to the era of liberalism between the New Deal and the late 1970s and through to the era of deregulation and resurgence of free market ideology since 1980, Acemoglu and Johnson’s narrative nicely but fairly conventionally retells the story of shifting political power that coincides with the well-known arc of income inequality from its high level in the 1920s to its low circa 1970 and climb back to earlier heights today. Some degree of policy progressivity seems gradually to have become necessary to the survival of business elites in the mid-20^th century as the potential of near-universal suffrage was grasped by organized labor and its allies and as the challenges posed by Fascism required mass enlistment in war and delivery of consumer and citizen welfare gains when that war ended. The resurgence of pro-market ideology was partly a matter of effective vision-building and public discourse, but it received a boost from the collapse of the Soviet Bloc, the weakening of unions by the actions of right-leaning governments, and the co-opting of mainstream center-left parties by centrists from the more educated strata of the labor force that were gaining from globalization, de-industrialization, and financialization.

Acemoglu and Johnson argue that our society needs to adopt policies that encourage technological changes that serve people’s needs and that we can’t simply rely on the market to ensure that technology develops in welfare-promoting ways. But how will a society as fractured as that of the U.S. today coalesce around policies that challenge big tech? The decades since 1980 show that relying on our political institutions can’t save us from the failures of markets if citizens aren’t alert to their own interests and don’t understand why the gains of the mid-20^th century have been steadily eroding. Since Power and Progress punches well when identifying problems but offers no explanation of what political forces will give “society” the means to fight back, the plutocrats who run our largest companies can set the book back on their nightstands and enjoy a good night’s sleep.