‘Power And Progress’: Ringing the Alarm-Bells for the Future?

Chandrahas Deshpande
Professor of Economics Welingkar Institute of Management, Mumbai

Preamble

A recent documentary, “Social Dilemma” successfully captures the popular imagination about the perils or ill-effects of High Tech on personal and professional lives of people. In recent years, several Economists have taken deep and timely interest in trying to explore the influence of technology and the tech-led development paradigm on wider issues like media, democracy, society and the nexus between businesses and the powers-that-be. (Baldwin 2017; Coyle 2020; Frey 2019). The theme lends itself easily to the analysis of institutions, the incentive-structure and other issues related to various trade-offs obvious to economists.

In this field, another powerful account has recently been presented by Daron Acemoglu and Simon Johnson (hereinafter AJ), two of the most prolific and respected contemporary economists, in their book, ‘Power and Progress’ (2023). Like Acemoglu’s two previous books (Acemoglu 2012, 2020), this monumental work also constitutes a thoroughly engaging narrative interspersed with illuminating historical references. The book raises issues of fundamental importance on ‘the shape of things to come’ and simultaneously, suggests some remedial measures through which the Modern Digital Technologies can be redirected for greater human welfare. Our brief piece here, highlights the principal messages of the work, its contemporary relevance and offers our comments on the book.

Key Messages of the Book

A few, select quotes (and claims) from the book are the best means to capture the essence of the authors’ contribution:

“…To the best of our knowledge, how political and social power shape technological choices, and how institutions and technology choices together determine how much owners of capital, entrepreneurs, and workers of different skill levels benefit from new production methods, are original to this book. Using this framework, we reinterpret the major economic developments of the last thousand years…” (p. 431).

“…..our book argues that the main issue is the redirection of technological change away from a singular focus on automation and data collection, toward a more balanced portfolio of new innovations…” (p. 432).

Supporting the fundamental approach as illustrated above, the authors put forth some arguments, which can be considered as the key messages of the book:

• The broad-based prosperity of the past was not the result of any automatic, guaranteed gains of technological progress, but it emerged because and only when the direction of technological advances and society’s approach of dividing the gains inequitably were pushed away and when it made the progress work for more people.
• Today we are blindly optimistic and more elitist with the decision makers not concerned with mass-suffering. Today’s progress is enriching a small group and disempowering many.
• A new, (more) inclusive vision of technology can emerge only if there is change in the basis of social power.
• The post-World War II economic growth was rapid and widely shared, benefiting all. However, the New Digital Technologies (DTs) have made vast fortunes only for some, but most workers, especially the less educated, have suffered. This has resulted in accentuating the inequalities.
• Automation and offshoring have raised productivity and corporate profits, but nothing like the ‘shared prosperity’ in the US and in other advanced economies. Throughout the 20th century, automation was rapid but did not reduce the demand for workers, because it was accompanied by other improvements and reorganization, which generated new activities and tasks for workers. But today, the scenario is vastly different. To quote AJ in this context, “… Even at the best of times, the direction of technology and high wages are contested. Left to their own devices, many managers would try to reduce the labour costs by limiting wage raises and also by prioritizing automation, which eliminates labour from some tasks and weakens the bargaining power of workers. These biases then influence the direction of innovation, pushing the technology more toward automation…” (AJ p. 258).
• Although the recent technological achievements and scientific advances have been unprecedented, the ‘blind techno-optimism’ needs to be contested and then develop new ways to use science and innovation. Sometimes the consequences of technology are aligned with the interests of the powerful which might prove costly to the rest. Shared vision is therefore very critical.
• Shared prosperity is more likely when countervailing power holds these business and technology leaders accountable – and pushes the methods of production and innovation towards more worker-friendly direction. What society ends up with – a selfish, narrow or an inclusive vision - is a political, social and economic choice.
• In the era of AI, the ways of countering power with alternative sources is becoming harder. It is assumed that the unprecedented achievements of AI can only be for the benefit of societies. But do disruptions in the labor market, redistribution of power & prosperity towards data-controllers and dangers to democratic institutions necessarily benefit societies?
• Technology visionaries do not distinguish between technological change and progress. This vision is undermining prosperity and weakening democracy: amplification of the wealth and power of narrow elite at the expense of ordinary people – leading to the emergence of a ‘New Vision Oligarchy’ – wherein technology leaders with similar worldview also have similar blind-spots. In addition, they possess access to corridors of power and influence public opinion.
• The direction of progress depends on the vision a society chooses to follow – social power and power to persuade the investors. Modern society turns on “persuasion power” – the technology leaders are obeyed because institutions, beliefs, norms confer on them a great standing and prestige.
• Economic Institutions and Political Institutions (EIs and PIs) shape who has the best opportunity to persuade others. Rules of the political system determine the representation and who has the political power to set the agenda. Impact of PIs on ideas is even stronger
  – they decide who has voice and who can set the agenda.
• Social status and access – both shaped by society’s institutions and norms – determine whether diverse voices and interests are represented or heard in the process of important decision-making. This diversity of voices is important to build countervailing power and for limiting overconfident and selfish vision.
• DTs have become the graveyard of shared prosperity: wage growth has slowed, labor-share has declined, and wage-inequality has risen.
• Globalization and automation have been driven by the lure to cut labor-cost and sideline workers without countervailing power in the workplace and in the political process.
• The vision (articulated by any technology expert or economist or researchers) of almost inexorable benefits from technologies like AI, is “AI – Illusion” – it enriches and empowers elites, corralling technology towards automation and surveillance. Again, an apt quotation from the book highlights this sentiment in no uncertain terms: “… The truth is more nuanced. Imposing massive surveillance and data collection is not the only path of technological advance and limiting it does not mean banning technology. What we are experiencing instead is an antidemocratic trajectory charted by the profit motive and the AI illusion, which involves authoritarian governments and tech companies foisting their vision on everybody else…” (p. 375).
• Whereas the early evidence demonstrated more decentralized, democratized and healthy way of spread of internet & social media (SM), but this has now ended up with digital tasks as powerful weapons in the hands of autocrats for suppressing information and dissent, and SM has become a hotbed of misinformation & manipulation by authoritarian governments as well as by the extremists both on the left and right. The AI illusion favors the antidemocratic impulse.
• Whether DTs ought to focus only on new products/algorithms or they ought to work for the people should be social choice: choices over the direction of technology – should be the criterion for investors to evaluate companies. A new narrative, based on shared prosperity is critical for building countervailing powers in the digital age.
• Redirecting technological change does not imply blocking automation or banning data- collection, but encouraging technological development which complements human capabilities.

Analysis and Implications

The key messages emanating from AJ are based on select historical accounts which throw a meaningful light on the evolving relationship among three principal stakeholders, namely, households/families, corporates/technology leaders and policymakers/governments, in all phases of major technological change over the last thousand years. One of the major purposes here is to highlight the fact that whenever technology has been directed towards inclusion and improvement of workers and the underprivileged or undereducated, the results have been beneficial for the entire society. A case in point is the automobile revolution in the USA in the 20th century which was inclusive in character.

AJ ask a very basic question: Where will our future advances focus? Whether (more) on surveillance/automation or on empowering workers by creating new, productive tasks? And herein lies the rub: It does not remain a mere question of impact of technology on specific sectors or industries or even workers, but it entails wider implications for the issues of corporate governance, inequality and political economy of democracy as also for decentralization of economic power.

The messages which we have summarized above express certain concerns of AJ, which can be broadly classified as follows:

1. The prevailing paradigm of ‘blind techno-optimism’ of the technology leaders vs. a ‘shared vision’ for society.
2. Enrichment and empowerment of a few vis-à-vis exclusion and/or disempowerment of the people.
3. Determination of the choice of technology by a few powerful elite rather than a choice emanating from a broader, shared societal vision.
4. AI is accentuating the already dominant scenario of the use of high technology for surveillance and data-capture at the cost raising productivity and welfare of (especially uneducated) workers.
5. Whether democracy itself is under threat because of the temptation for the political powers of the day to misuse technology for the suppression of dissent and other anti-democratic ‘innovations’.

Needless to say, all these are necessarily interconnected issues and, of course, are valid in the contemporary economic and business world. AJ consistently call for ‘redirecting’ the technological change for the greater good. The book also offers some remedial measures/policies to rectify the situation. According to the authors, the future course of technological progress is never pre-ordained or predetermined but rests critically on the collective/collaborative decision or choice generated via a broad-based debate in society.

The book gives several instances from history wherein the industry and business have worked with workers and with Governments to generate shared prosperity. In recent years, however, this constructive partnership is getting rapidly eroded and the new, glamorous technologies like AI are acting as engines to further divide societies rather than to unite them. The workers, particularly the uneducated ones, are fast losing the battle and are getting increasingly excluded or disempowered in this process of unidirectional technological change.

Policy Recommendations of AJ

Expectedly, the authors have not fallen short of offering a few recommendations to correct these unhealthy and damaging trends. Calling for transparency across various operations, they emphasise that the mere presence of countervailing power or even of new institutions is not going to redirect new technology but “Specific policies that change incentives and encourage socially beneficial innovations are necessary” (p. 402). These initiatives would include labour market policies, fiscal incentives and data-related policy reforms.

Turning to the specific policies, the authors outline the following ones:

• Market incentives for redirection – Use of fiscal tools like subsidies for socially beneficial technology
• Breaking up ‘Big Tech’ – this break-up is necessary to reduce their dominance and create room for greater innovation. Break-up plus antitrust could act as complementary tools.
• Tax Reform – The amount of asymmetry in taxing automation is perverse and is at the cost of promoting employment. Priority to be given to reduce or fully eliminate payroll taxes while taxing capital.
• Investing in Workers – Raising the marginal product of workers through training.
• Privacy protection and data ownership – It strengthens the protection of user privacy since too much data in the hands of a few platforms leads to imbalance of power. Providing ownership rights to users for their data can prevent Big Tech from misusing data.
• Fiscal Tools – Using Digital Advertising Tax to encourage alternative business models; Wealth Taxes to narrow wealth gaps; and Redistribution and strengthening of Social Safety Net.

Towards the end of their book, the authors reiterate the importance of historical developments. They stress that the future path of technology remains unwritten: in recent history, once the narrative changed and people became organized, societal pressure and financial incentives redirected the change of the Technological path. This needs to be done for the future direction of the new DTs.

A Few Observations

Such a massive and penetrative document is bound to raise some important issues, which the present reviewer may like to point out.

• Humanity at large has in recent years enjoyed enormous, unprecedented and even unexpected benefits of technological advances. These benefits have not been restricted to the ‘chosen few’, but have been widely shared, especially in the field of medicine. The reviewer feels that somewhere, a more balanced approach, more objective evaluation of the recent technological achievements (as essentially benefiting wider masses) would have been prudent and timely. There is only occasional mention in the entire book of the positive contribution of technology to the enhancement of human welfare.
• While the authors rightly take cognizance of the dangers of the hand-in-glove approach of the technology giants, elites and policymakers, it is moot whether the political powers of the day can continuously possess the wherewithal and the expertise to regulate the concentration/monopolistic tendencies of the big tech and to “redirect” the desired tech change. This would entail a dynamic redefining of the entire gamut of interrelationships among the institutions and stakeholders concerned: corporates, regulators, consumers, worker-organizations etc.
• For several decades in recent history, technological advances and achievements have thrived and have been sustained in an environment which always married liberal democracies and market-led economic (capitalist) system. As several leading commentators have noted, currently the emerging national and global situations are increasingly getting hostile to both liberal democracy as well as market capitalism, individually as well as together. (Bardhan 2022, Fukuyama 2022, Wolf 2023). At such a time, coupled with the added dimension of geopolitical upheavals across the world, the future scenario is likely to be even more ambiguous, volatile and complex. We feel that the interface between technology on the one hand and the political economy of the market- place on the other is likely to have a strong bearing on the direction of technology over the medium-term future.

Concluding Remarks

The book under review merits widespread discussion and debate as it articulates in a forthright manner the current malaise affecting the business world and the economy at large. While it is an eye-opener to the tech optimists, it is simultaneously also a wake-up call to the policymakers of the present day. The book throws light on the evolving interconnections among the polity, the economy, and the society, which seem mesmerized by every technological change and seem convinced by powerful and influential opinion that such change is necessarily progressive. It makes many convincing arguments about the perils of the ‘unidirectional’ technological changes which are under way, and as such, it is a must-read for anyone yearning for a deeper understanding of the impact of today’s technologies on societies.

References

Acemoglu, Daron and James Robinson (2012) Why nations fail: the origins of power, prosperity and poverty. Crown Publishers.

Acemoglu, Daron, and James Robinson (2020) The Narrow Corridor: States, Societies, and the Fate of Liberty, Chapters 1 &2. Penguin Press.

Acemoglu, Daron, and Simon Johnson (2023) Power and Progress: Our 1000-Year Struggle Over Technology and Prosperity. Basic Books.

Baldwin, Richard (2019) The Globotics Upheaval: Globalisation, Robotics, and the Future of Work. Weidenfeld & Nicolson

Bardhan, Pranab (2022) A World of Insecurity: Democratic Disenchantment in Rich and Poor Countries. Harvard University Press

Frey, Carl Benedikt (2019) The Technology Trap: Capital, Labor, and Power in the Age of Automation. Princeton University Press,

Fukuyama, Francis (2022) Liberalism and Its Discontents. Macmillan, Wolf, Martin (2023), The Crisis of Democratic Capitalism. Penguin Press