Are Acemoğlu and Johnson Wrong?
Today, I want to share my thoughts on how technology has changed and will continue to change our world, based on a recent book that you might find interesting. The book is Power and Progress: A Thousand-Year Struggle by Daron Acemoğlu and Simon Johnson, published in late 2023 (*).
Daron Acemoğlu, a Boğaziçi University graduate and now an Institute Professor at MIT, has spent twenty-five years studying the history of wealth and poverty, and how new technologies impact economic growth, jobs, and inequality. His books Why Nations Fail and The Narrow Corridor are available in Turkish. Simon Johnson, the Ronald A. Kurtz Professor of Entrepreneurship at MIT Sloan School, has also been examining global economic crises and recoveries for thirty years. He is the author of Jump-Starting America, White House Burning, and 13 Bankers.
Throughout history, technology and progress have often been seen as linked. However, technology has frequently been controlled by those in power—has this always benefited society? With the latest technological advancements controlled by a small group of wealthy individuals, should we rethink how power and technology interact?
Acemoğlu and Johnson explore this issue through history and argue that technology should be used to promote democracy rather than just for surveillance. They offer a new perspective, backed by economics and history.
While technology is advancing and bringing us closer to a better world, we still face challenges like inequality, pollution, and radicalism. Are these just growing pains of progress? Techno-optimism is widespread, with many believing that innovations will improve over time despite their flaws. This idea is not new.
To read more, continue with the article…
Jeremy Bentham, known as the founder of utilitarianism, proposed the panopticon prison design in 1791. This design, featuring a central guard tower in a circular building, was intended to give inmates the impression of constant surveillance due to proper lighting, thus encouraging more obedient behavior for the greater good of society. As such, increased surveillance in factories would also lead workers to put in more effort, without the need to boost their wages to drive their motivation. Bentham and Adam Smith argued that emerging technologies would expand individuals’ abilities and that their widespread adoption would boost productivity and efficiency throughout the economy. Smith even suggested that better machinery, greater skill, and more precise division of labor would make much less labor sufficient for any task, improve living conditions, and significantly raise the real price of labor. However, this was not the case, as few technological inventions have increased the equitable distribution of prosperity. For example:
- Agricultural technological advances in the Middle Ages and early Modern Era (plows, advanced mills) did not benefit poor peasants.
- While European ship design enabled transoceanic trade, it also facilitated the transportation of slaves.
- Early textile factories during the British Industrial Revolution generated great wealth for a small minority, yet worker incomes did not rise over the century, living conditions worsened, and working hours lengthened.
- The invention of the cotton gin made the U.S. the world’s largest cotton exporter but also intensified slavery.
- Artificial fertilizers developed at the end of the 19th century increased agricultural yield, but the same chemicals were also used in weaponry that caused the deaths of hundreds of thousands during World War I.
- Advances in computer technology over the past half-century have enriched a small group of entrepreneurs and investors but left those without a university education behind, with real incomes falling.
Despite all this, our ability to live in better, healthier, longer, and more comfortable conditions than our ancestors is rooted in scientific and technological advancements. However, widespread prosperity did not emerge as a natural or inevitable result of technological progress: it only emerged when the direction of technological advancements and the methods of sharing societal gains were kept away from narrow elite-serving arrangements.
Today, I intend to share my thoughts on the changes brought about and yet to be brought about by technology, based on a book that I think you’ll find quite interesting. The book is *Power and Progress: A Thousand-Year Struggle* by Daron Acemoğlu and Simon Johnson, which was published recently in December 2023 (*).
Daron Acemoglu, who was educated at Boğaziçi University and currently holds the highest honorary title of Institute Professor at MIT, has been researching the historical roots of prosperity and poverty, and the effects of new technologies on economic growth, employment, and inequality for twenty-five years. His books *Ulusların Düşüşü* and *Dar Koridor * have been published in Turkish. Simon Johnson, also at MIT Sloan School as the Ronald A. Kurtz Professor of Entrepreneurship and a former chief economist at the IMF, has worked on global economic crises and recoveries for thirty years. He is the author of *Jump-Starting America*, *White House Burning*, and *13 Bankers*.
Throughout history, technology and progress have been viewed as interconnected drivers of advancement. Technology has often been directed by those in power, but has this always served the common good? With the latest technological developments controlled by a small group of capital holders worldwide, should we reconsider the relationship between power and technology?
According to Acemoglu and Johnson, this relationship should be redefined as a tool for democratization rather than surveillance. Their new vision is supported by a comprehensive yet long story drawn from economics and history.
Thanks to technological advancements, we are continuously moving toward a better world. Yet, we still face many issues such as inequality, air pollution, and radicalism—are these just the growing pains of a better world? Techno-optimism is now prevalent, with the conviction that innovations will persist and their shortcomings will be addressed gradually. This perspective is not new, though.
HAS TECHNOLOGICAL PROGRESS TRULY DELIVERED PROSPERITY?
The progress initiated by the Industrial Revolution is now in full swing with the AI revolution. But has technological evolution alone brought prosperity? Are richer societies happier? The technological advancements from discoveries and inventions over the last three centuries have not only reshaped our daily lives but also significantly influenced work, social interactions, and administrative structures in society. If humanity does not forget, the two world wars hold immense lessons in both loss and learning. However, as the saying goes, “Memory is prone to forgetfulness,” it seems that humanity has likely forgotten the lessons learned.
As we ponder what’s next, I want to offer some consolation with the saying, “Whatever happens, happens for the best.”
The Aftermath of the Industrial Revolution: What Followed?
In 19th-century England, changes in the political electoral system, the introduction of laws protecting workers’ rights, and the emergence of labor unions transformed the ways wages were determined and production was organized. In addition, a new wave of innovation from the U.S. gave technology a new direction. The focus of technology was no longer just on shifting tasks from workers to machines or better monitoring workers, but on enhancing worker productivity. This development initially took hold in Western Europe before expanding globally over the following century. Today, our improved living standards compared to those of our ancestors result from the early industrial workers’ organization, resistance against the monopolistic control of technology and labor conditions by elites, and the ongoing push for a fairer distribution of technological advancements.
In 1960, productivity in industrialized countries had surged compared to previous decades. American, German, and Japanese workers were now achieving significantly higher productivity than they had two decades earlier. As a result, everyday products such as cars, refrigerators, microwaves, TVs, and phones became more affordable for the average consumer. Antibiotics were also defeating diseases like tuberculosis and pneumonia. Yet, technology was also harming nature, and the threat of nuclear war was added to the mix. Nevertheless, we were hopeful.
The concern of “technological unemployment,” coined by Keynes in 1930, first appeared. Keynes addressed the potential of new production methods to reduce the need for human labor, potentially leading to mass unemployment. This concern was also shared by David Ricardo, one of the pioneers of modern economics. However, the rapid adoption of personal computers and digital tools in the 1980s fueled a surge in optimism. Steve Jobs reflected the spirit of the era in 2007 with his statement, “Let’s go invent tomorrow instead of worrying about what happened yesterday.”
The Modern World
However, following 1980, the world experienced a reversal of this trend. While 6% of American men aged 25-54 were out of the labor force in the 1960s, this figure has now risen to 12%. The primary issue is that individuals without a university degree often face challenges in securing well-paying jobs. Although economic growth after World War II initially boosted real incomes, new digital technologies primarily benefited entrepreneurs, managers, and investors, leaving many workers with declining real wages. This has led to the emergence of a two-class society, dividing workers from those who control economic and social opportunities. The distribution of technological advancements now depends on our economic, social, and political choices. Technology has the potential to either promote equitable prosperity or deepen existing inequalities.
The belief that technological advancements would benefit everyone stems from the “productivity bandwagon” theory. This theory suggests that when companies adopt new machinery and production techniques, they become more efficient, boosting production and profits. This increased efficiency leads to higher demand for labor and, consequently, higher wages. For instance, as Ford and GM implemented more efficient factories, they expanded their operations and created more jobs. In 1899, a few thousand workers produced 2,500 cars annually. By 1929, both companies were selling 1.5 million cars each year, and this substantial growth contributed to wage increases across the economy.
However, an increase in productivity does not necessarily mean an increase in labor demand. Productivity is defined as the average output per worker. While we hope that increased productivity will lead to higher labor demand, employers base new hiring decisions on marginal productivity. Marginal productivity, on the other hand, has different dynamics. For instance, automation and globalization have increased productivity, but since these developments have been achieved through mechanization and cheaper labor in other countries, they have not contributed to the equitable sharing of prosperity in developed nations.
Innovation boosts marginal productivity: for instance, new software can significantly enhance the productivity of technicians. Automation, by cutting costs and increasing efficiency, has the potential to create more jobs. These improvements can ripple through the economy.
Today
In this era, the sharing of ideas and dissemination of knowledge has become remarkably easier and faster, and the impact of scientific progress on our lives is immediately felt. For example, within just 42 days of identifying the Covid virus in early 2020, a vaccine was successfully developed. However, how we utilize our knowledge and science depends on the vision we hold.
Today, we witness how the same scientific and technological advancements are employed for vastly different objectives, depending on the visions and goals of those in power. Social media, for instance, can be utilized to influence, monitor, and even scrutinize individuals’ private lives, whether transparently or behind the scenes.
While some, like Ray Kurzweil, argue that artificial intelligence will merge with humans to create superhumans, others, such as Bill Gates and Elon Musk, are concerned about poorly defined objectives for AI. Technology leaders who wield social power and establish a vision oligarchy can significantly sway intellectual leaders, journalists, influential business figures, academics, and other thought leaders.
Will we wait and hope that, as in the early stages of industrialization, various interest groups like workers and employers will clash to find the truth and increase the prosperity of the majority of society? Or will we take action ourselves?
In modern societies, the prevailing power is persuasive power. Political power stems from individuals and groups forming alliances and acting collectively, as well as the authority of political institutions to legislate and enforce laws. Economic power is derived from the control and utilization of economic resources. Coercive power is based on the ability to create violence and exercise command and control. Persuasive power, on the other hand, emerges from setting agendas and convincing others to adopt one’s ideas.
The acceptance of an idea is influenced by various factors, including institutional dynamics, social status, the environment in which the idea emerges and spreads, and the personal attributes of its proponents. Confident individuals, have a strong social network and hold influence can more easily promote their ideas. Generally, ideas that are straightforward, accompanied by an appealing narrative, and have an element of truth are more likely to gain traction. It also matters if the idea is presented by someone of high social status. As evolutionary biologist Richard Dawkins pointed out, even poor ideas can gain significant traction if they are memorable. Conspiracy theories are a prime example of this. Moreover, the more frequently and from diverse sources you hear an idea, the more credible and plausible it seems.
As for setting the agenda, those who ask questions, set priorities and choose which options to highlight or dismiss wield considerable power in shaping public discourse and influencing opinions. We are naturally inclined toward “confirmation bias,” meaning we gravitate toward information that validates our existing beliefs. Additionally, our strong tendency to imitate makes it challenging to resist the ideas and visions promoted by those in control. A similar dynamic occurs on social media, where even clearly labeled unreliable information can still influence users simply through exposure.
For your idea to succeed, it must offer a perspective that considers the interests of the masses or, at the very least, give the impression of doing so. Additionally, passionate perspectives often become more dominant and even contagious. If you are wealthy or have political influence, your social status is higher. As Lord Acton said in 1887: “Power corrupts.” People convince themselves that what really matters is themselves—their ideas and interests—making excuses to ignore other viewpoints. According to social psychologist Dacher Keltner, “The more power people derive from helping others, however, the more likely they are to prioritize selfishness over altruism.” Affluent and high-status individuals likely believe they are simply receiving what they are entitled to, such as not having to wait in traffic with their expensive cars. The possession of power often numbs individuals to the hardships faced by others.
Therefore, when shaping the future, it is essential to incorporate a range of voices, interests, and perspectives to counterbalance dominant views. Additionally, curbing self-serving and overly confident visions is crucial, and democratic political institutions play a key role in this effort. Pluralism represents the cornerstone of democracy. It prevents any single perspective from monopolizing political and social preferences, thereby allowing for checks on self-serving agendas. In non-democratic regimes, political connections often lead to favoritism, resulting in monopolies and the concentration of resources among elites and their allies. A troubling example today is the European Union’s trend towards “delegating to technocrats,” where crucial decisions on finance, taxation, climate issues, and AI regulations are made by technocrats, potentially bypassing public scrutiny and involvement.
According to the authors, the greatest advantage of democracy is its ability to avoid the hegemony of narrow visions. Democracy provides a more balanced distribution of social power and better laws, as well as a framework where ordinary people are politically active, diverse perspectives are considered, and monopolies in agenda-setting are prevented. In summary, whether in the feudal aristocracy of the Middle Ages, the American plantation owners, or the Russian Communist Party leaders, technology has never been socially neutral, and practices under the guise of progress have left behind unhappy people. Historically, the widespread sharing of technological benefits has only been realized when landowners and religious elites were unable to enforce their visions or monopolize the surplus generated by new technologies. In many periods of agricultural transformation, the advantages were concentrated within a narrow elite rather than being broadly distributed.
During the industrialization period, the concentration of workers in factories and urban centers introduced balancing forces absent in agrarian societies, enabling progress to impact various facets of society. In the 19th century, the rapid dissemination of information marked a shift. On June 12, 1851, a London fair with 13,000 participants highlighted various machines, signaling the rise of a new entrepreneurial class. This emerging class was composed not of nobility or wealthy families but of individuals who combined limited resources with technological and entrepreneurial skills to achieve notable success and wealth. Their rise was a key driver of the British Industrial Revolution. Technology enabled the English middle class to ascend to prominent positions, reflecting deep social and institutional changes in English society over the preceding centuries.
Was the Industrial Revolution caused by the change in the intellectuals’ perspective on nature brought about by the Scientific Revolution? The Scientific Revolution was actually a pan-European phenomenon, and China was far ahead in science in 1500, yet the industrialization movement did not originate there.
The Scientific Revolution made three significant contributions to the Industrial Revolution. First, it laid the groundwork for the mechanical skills of entrepreneurs and inventors. Second, scientific methods led to discoveries in physics, chemistry, and later in industry. In the 18th century, England’s leading role in the Industrial Revolution appeared to be influenced by various factors including geography, culture, natural resources, economic conditions, and government policies.
In reality, the ongoing social changes played the central role in this process. By the end of the 16th century, England had shifted its religious affiliation, even establishing its Anglican Church, moving from Catholicism to Protestantism. However, besides Britain, there were other Protestant countries such as Germany, Scandinavia, and the Czech Republic. Continental Europe also had natural resources like coal deposits. Yet, these did not prove to be decisive in the Industrial Revolution. The textile factories powered by water initially led the Industrial Revolution. The significance of coal and iron emerged in the second phase of the Industrial Revolution, after 1830.
High labor wages, seen as an economic factor, and the resulting attractiveness of technologies that reduced labor costs were common issues; wages were also high in the Netherlands and France. Labor costs likely served as a supportive factor. New technologies aimed to replace highly skilled craftsmen with machines and unskilled, cheap labor. However, factors such as agricultural productivity, the legal protection of landowners’ and merchants’ property rights, and the impact of profits from the slave trade and Caribbean plantations on industrialization were not sufficiently large or decisive. Nonetheless, the middle class played a crucial role.
Among the early successful figures of the Industrial Revolution were Abraham Darby (pig iron production in a coke-fired furnace), Thomas Newcomen (steam engine), Richard Arkwright (spinning machine), Josiah Wedgwood (ceramics), and James Watt (improved steam engine). These self-taught inventors lacked formal education. The traditional structure of the English understanding of popular sovereignty and individualism, extending back a thousand years, provided the raw material for these changes.
China had the scientific and discovery capacity needed for the Industrial Revolution but lacked the institutional framework to encourage its people to challenge the status quo creatively, innovatively, and in established production functions. In Britain, to rise in society, acquiring wealth was necessary. In the rapidly changing British economy of the 18th century, acquiring wealth was not solely through landownership; one could also earn money by trading or establishing factories. Social status followed this. As a result, while industrial entrepreneurs made decisions regarding technology, organization, growth, and wage strategies in their interests, they did not share the productivity gains with workers. However, as workers gained political and social power, they became more demanding.
The technological advancements in Britain during the industrialization period resulted in outcomes detrimental to workers; this was a choice rather than an unavoidable side effect of progress. As a power balance began to form against factory owners and the wealthy elite, first in workplaces and then in the political arena, workers were able to negotiate for better conditions and higher wages. In the early days of factories, productivity was enhanced through the division of labor and discipline in simple, repetitive tasks. Adam Smith highlighted this in his work *The Wealth of Nations*, using the example of the needle-making process in factories to show how each worker had a very specific task. This resulted in increased working hours, leading to hierarchical decision-making processes inspired by military structures. The tough working conditions and low wages were partially a result of public policies that showed little concern for the poor and orphans. Meanwhile, environmental pollution spiraled out of control, exacerbating living conditions and increasing domestic violence due to alcohol abuse. However, after the 1840s, innovations such as the railways, the invention of the telegraph, the establishment of telephone networks, and increased productivity created new jobs and raised the marginal productivity of workers. All of these factors contributed to giving labor more bargaining power.
Another crucial factor that drove Britain towards wealth sharing was the booming American industry in the second half of the 19th century. The focus of American technology was on increasing efficiency, significantly contributing to workers’ marginal productivity. Labor demand was rising in Britain and Europe, while the U.S. had abundant land and capital but faced a shortage of skilled labor. Immigrants to America had higher wages and bargaining power compared to their home countries. Due to the high cost of skilled labor, America prioritized not only automation through inventions but also improving efficiency with unskilled workers.
In 1850, 2,193 patents were granted in the U.S., rising to 67,370 by 1910. The system approach and mass production increased output and reduced costs, enhancing workers’ marginal productivity and living standards. The use of electric motors allowed for more flexible and modular production methods compared to the old belt-driven systems, leading to a rapid increase in the number of specific machines. The growing number of white-collar workers in factories improved designs, increased efficiency, created new functions and roles, and raised demand for blue-collar workers. In contrast, British factories facilitated worker organization, leading to various movements demanding better working conditions and political rights. Politics became responsive to public pressure.
The 1871 Act legalized trade unions completely. Under the new trade union framework, the Workers’ Representation Committee laid the foundation for the Labour Party. This organization was underpinned by the spread of industrial activities across the country and the fact that people were now working and living in crowded urban centers.
Technological advancements in the 19th century had varying impacts across countries. For instance, railroads in India benefited British economic interests rather than contributing to India’s economic modernization. Access to raw cotton improved for England, and “European” products were sold in India’s remote regions, further challenging Indian industry. In summary, parts of India and Africa were reduced to raw material suppliers to satisfy Europe’s growing industrial appetite.
The First World War and subsequent influenza pandemic resulted in millions of deaths in Europe. By 1930, economic contraction in most European countries was worse than in America. Germany was already in deep political polarization, with unemployment exceeding 30%. These issues set the stage for the rise of the National Socialist Party. Similar issues arose in France, with extreme parties gaining power. Sweden, however, responded differently. The Swedish Labor Party formed a coalition with agricultural workers and the middle class, laying the foundations for a more balanced distribution of profits between labor and capital. Redistribution through taxation and social insurance programs were implemented. The party brought together the government, trade unions, and private businesses to institutionalize profit sharing. In 1938, an agreement was signed with the business world, adopting key elements of the Scandinavian social democratic system. The agreement included setting sector-level wages, sharing profits and productivity gains with workers, negotiating working conditions with trade unions, avoiding mass layoffs, and directing state incentives towards worker-friendly technologies. By the early 20th century, the richest 1% in Sweden held over 30% of the national income, but by the 1960s, Sweden had become one of the most equitable countries globally, with the wealthiest 1% holding around 10% of national income.
President Franklin D. Roosevelt took office with a promise to overcome the Great Depression. In 1933, the United States introduced its first minimum wage laws. Roosevelt’s vision included public projects, government regulations aligned with corporate visions, and the strengthening of the labor movement. The Wagner Act of 1935 granted workers the right to organize collectively without fear of employer threats or dismissal. However, unlike the Swedish Labor Party, the desired societal goals were not fully realized.
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The occurrence of these major institutional revisions in Sweden and the U.S. within a democratic framework is of significant importance. The impact of the U.S. economy’s redirection towards war production was substantial in the Allied victory in World War II. The increase in productivity during and after the war led to an average annual GDP per capita growth of 3.1% from 1940 to 1973. The mass production techniques well-established in the automobile industry spread to every sector of American industry after the war. In the 1930s, the U.S. produced about 3 million cars annually, and this number rose to 8 million by the 1960s. It can be said while America created the car, the car also came to define America. As real wages increased, inequality rapidly decreased. The secret to these developments lied in a technology and institutional framework that created new jobs at all levels and allowed workers to share productivity gains with employers and managers.
In the process, we have examined so far, the 20th century saw different developments and social changes across the three dominant empires of the world. While the Industrial Revolution took place in the United Kingdom and the United States, as detailed by the authors, the other two empires dissolved. The Austrian-Hungarian Empire was replaced by Germany, and other countries veered towards fascism, affecting and dragging down continental Europe.
The Ottoman Empire was completely dissolved, and the young Turkish Republic managed to survive by aligning with the winning side in the world wars. In the aftermath, European countries and Japan, along with the Pacific coasts, struggled to recover and lost their previous stature. Today, they continue to grapple with structural problems.
John Maynard Keynes’s concerns about technological unemployment became increasingly relevant in the post-World War II era. In its 1946 issue titled “Automatic Factory,” Fortune captured the excitement around automation of the time with the words, “The threat and promise of machines requiring no labor have never been so close.” The government invested directly in automation technologies, provided incentives for the development of digital technologies, and recognized the importance of creating new jobs amidst rapid automation. The U.S. education system expanded to equip workers with skills required for new jobs. Meanwhile, the critical role of labor unions during the war and the Wagner Act strengthened the labor movement. The year 1946 saw the most intense period of labor-management conflicts and strikes in U.S. history. Unions demanded that cost reductions and productivity gains be shared with workers. Emerging sectors with new jobs saw higher productivity increases alongside a rise in demand for lower-skilled workers. Meanwhile, consumer activism led to significant regulatory changes. Ralph Nader’s 1965 book, *Unsafe at Any Speed*, was a manifesto advocating for corporate accountability. In 1966, the National Traffic and Motor Vehicle Safety Act established the first safety standards for cars. The Environmental Protection Agency was created in 1970 to address pollution caused by businesses. The Occupational Safety and Health Administration (OSHA) was established to ensure worker health and safety. The Consumer Product Safety Act and the Equal Employment Opportunity Act were enacted in 1972, and the FDA was granted significant powers. All these changes were the result of a new regulatory strategy.
In Europe, in turn, the 30 years following the war saw extraordinary economic growth shared widely among the population. Similar to the U.S., automation began to take hold while worker-friendly technologies that created new jobs were also implemented. The Marshall Plan’s post-war reconstruction program provided a roadmap for technology transfer. This economic development model was supported by worker training programs. In Nordic countries, technological investments were implemented within a corporatist framework, whereas the German industry established a distinctive apprenticeship training system. Regarding the second pillar of welfare sharing—the labor movement—Britain saw the creation of a government commission led by William Beveridge in 1942, which proposed a state insurance program to protect people “from the cradle to the grave.” Key components of the program included social security, unemployment insurance, workers’ compensation, disability insurance, child benefits, and nationalized health services. The Labor Party, which came to power immediately after the war, promised to implement the report in its entirety.
During this unique period of welfare sharing in the Western world, three groups were deprived of political power and economic benefits: women, immigrants, and minorities, including African Americans in the U.S. Another excluded group was the people of East Asian countries. The populations in European colonies had neither a voice nor a share in the prosperity. However, outside the West, Japan and South Korea also joined the rapid growth bandwagon.
Subsequently, the balance in the U.S. shifted as the underlying economic model of welfare sharing began to be questioned. Since the early 20th century, the business community has been organizing against regulations and laws strengthening labor unions. Major corporations established organizations such as the American Enterprise Institute and the American Liberty League to critique policies and propose alternatives.
During this period, employer-friendly right-wing organizations and think tanks were funded by wealthy Americans. As usual, large U.S. companies directed their tax-exempt charitable activities and donations towards strategic objectives. By 1980, the idea that what benefits business also benefits the country had become widely accepted.
The idea was that changes beneficial to business would also benefit society as a whole by increasing demand for workers and leading to shared prosperity. This concept evolved into the trickle-down theory in economics, which became associated with Reagan’s 1980 economic policies. The theory suggested that “if we reduce taxes on the wealthy, they will invest more, productivity will increase, and society will benefit.”
From the free market perspective, if companies offer unsafe or low-quality products, consumers will be unhappy and switch to better options provided by other businesses. Therefore, additional regulations are seen as a hindrance, reducing profitability, which would lead companies to either raise prices or reduce labor demand. These idealized market ideas have been embedded in economic theories since Adam Smith’s concept of the “invisible hand” in *The Wealth of Nations*. The “invisible hand” metaphor argues that with sufficient competition, the market will naturally produce good outcomes for everyone through the self-regulating actions of the “invisible hand.”
On the flip side, John Maynard Keynes and others highlighted the imperfections in market operations, emphasizing that ideal regulation is unattainable. Post-war state regulations often introduced inefficiencies, leading to the belief that markets free from regulation could benefit both the country and the public. This idea formed the basis for new public policies. George Stigler and Milton Friedman (a Nobel laureate in economics) from the University of Chicago argued that the only responsibility of companies is to make a profit and provide high returns to their shareholders. This perspective led to performance-based rewards for executives, such as stock options, aligning their performance with the value they brought to shareholders. However, as seen in the Enron case, some executives pushed boundaries. This doctrine also shifted the balance between managers and workers.
The era of shared prosperity now come to an end. In the 1960s, the computer revolution was characterized by freedom and decentralization. In his book *Computer Lib*, which serves as a manual for hackers, Ted Nelson used the term “cybercrud” to describe the lies told by powerful individuals about computers and information, asserting, “The power of computers belongs to the people; we don’t want cybercrud.”
Unfortunately, the 1973 and 1979 oil crises led to high levels of unemployment and inflation (stagflation) in the Western world. The slowdown in growth impacted different groups unevenly. While wages for those with advanced degrees continued to rise, wages for those with a high school diploma or less fell by an average of 0.45% per year between 1980 and 2018. The distribution of income between capital and labor began to shift significantly from this period, with the share of capital increasing and the share of workers decreasing from the 1980s onwards. By 2019, labor’s share of national income fell below 60%. One of the two major changes that increased inequality was companies prioritizing the reduction of labor costs without the balancing effect of labor movements, leading to production shifting to non-unionized factories and countries with lower labor costs, such as China and Mexico, which meant a rise in outsourcing.
In this process, I observe with a sense of irony (sarcasm and cynicism) the shifts in societal thought and various practices, noting how self-serving, ruthless, and incapable people are of adopting and implementing common principles. However, simply knowing these things is not enough; as we share this knowledge and offer advice to one another, our lack of sincerity and failure to practice what we preach render it ineffective. In fact, our social lives full of contradictions often lead us to pessimism.
For example, while professing beliefs such as “He is not a believer whose stomach is filled while his neighbor goes hungry” and “The right of the servant,” we simultaneously adhere to principles like “Let every tub stand on its own bottom,” and “Let sleeping dogs lie.” I find these contradictions nonsensical. Perhaps everyone has just given up. Anyway, I’ll continue…
Automation
Digital tools that monitor and coordinate activities in distant facilities have assisted in the shift of production and outsourcing processes. In essence, globalization and automation have complemented each other. Blue-collar and office workers have become the primary targets of robotic and software automation across almost every industry. Additionally, the competition created by imports from China has affected numerous manufacturing sectors such as textiles and toys. In regions plunged into economic stagnation, marital problems increased; psychological issues, drug and alcohol abuse, and suicide rates rose. While the belief that market mechanisms work flawlessly, regulations are unnecessary, and companies’ primary job is to maximize shareholder value has gained acceptance, monopolistic companies’ ability to prevent new competitors from entering the market or to acquire competitors themselves has become a significant factor disrupting social balances. One reason for skepticism towards large companies is their potential to hinder the functioning of markets, and another is what is known as the “Arrow substitution effect,” named after Kenneth Arrow. This phenomenon was later termed the “innovator’s dilemma” by Clayton Christensen. According to this theory, large companies are reluctant to innovate because they worry that new developments might reduce the profits from their current products and services. New products may not promise higher profits for the existing company, whereas they might be satisfying for a new entrant in the market. Once large companies gain power in a particular geography or sector, opposing their vision becomes challenging; they can direct political and social power. By the 1960s, anti-trust laws, like regulations, were also seen as government intervention in markets. For instance, while big companies like Google and Amazon might resemble monopolies and behave like monopolies, the prevailing view was that the government should refrain from taking action until it was demonstrated that prices had been raised.
Today, Google, Facebook, Apple, Amazon, and Microsoft together account for about one-fifth of the U.S. GDP. Due to the non-interventionist mindset, Facebook has been able to acquire WhatsApp and Instagram, Amazon has bought Whole Foods, and Time Warner and America Online have merged. In the 1980s, American companies concluded that cutting labor costs was essential to compete with Japanese rivals. Consulting firms such as McKinsey played a key role in this process, leading to the elimination of many unskilled tasks. As a result, automation and robots decreased employment and wages instead of increasing productivity. Despite the daily bombardment of new products and digital applications over the past few decades, the shareable productivity gains have diminished. In France, inequality was somewhat curbed through union and minimum wage policies. As a result, in Germany and Japan, where the number of robots per industrial worker exceeds that of the U.S. by more than double, companies strategically invested in retraining blue-collar workers, which not only preserved jobs but also created new opportunities in computer-aided design and quality control.
Now, Artificial Intelligence
While there are debates about potential downsides, the dominant perspective is that AI will enhance efficiency in “life-saving” professions and drive innovations like personalized medicine. The Economist’s April 2021 report argued that concerns over AI-driven automation were unfounded, with the authors asserting that digital technologies ultimately benefit humanity.
AI is now targeting the automation of non-routine tasks as well. Robotic process automation, automatic speech recognition systems, and remote IT support robots are now used in credit card processing and e-commerce. The guiding principle should be how beneficial AI, robots, or automation are to humans. For instance, while GPS may not be highly intelligent, it is extremely useful. However, modern AI research has largely focused on defining AI as machines that operate autonomously, achieve human-level intelligence, and eventually surpass humans, following Turing’s vision.
Today, AI and big data have become an inseparable duo. Thus, modern AI has become scalable and applicable to different fields. The ultimate objective is to create a general AI capable of performing everything humans can do, entirely autonomously. This approach would allow AI research to be applied more broadly in automation, as most productive tasks carried out by humans involve a mix of routine and complex activities. Human intelligence is social; we acquire the necessary information for problem-solving and adaptation through open or indirect communication in society, and our reasoning is dependent on social interaction. Even individual relationships among people—through empathy and shared goals—can provide them with additional skills and abilities. Neither AI nor traditional digital technologies are capable of performing essential tasks that require social interaction, adaptation, flexibility, and communication. Statistical approaches used for model recognition and prediction are insufficient to capture the essence of most human skills.
When humans are not as dispensable as expected and intelligent machines are not as smart as presumed, what emerges is “so-so automation.” With the rise of AI, a “two-tier society” has been reborn; the power of techno-elites has increased with the tools they control, and as jobs become automated, people are pushed aside. Unfortunately, AI is also negatively affecting democracy. Is China’s surveillance model and social credit system a prototype of a “digital dictatorship”? With countries like Iran and Russia following suit, governments intent on silencing dissent are increasingly demanding new AI technologies. As researchers develop tools catering to this demand, AI’s appeal in these regimes grows.
Another concern is the rapid spread of misleading information. During the 2016 presidential election, Facebook emerged as a major platform for misinformation among right-leaning users. The prevalence of “echo chambers” reduced the chances of diverse perspectives reaching individuals. Algorithms create “filter bubbles,” which confine people to artificial environments where they are exposed only to views that align with their own political beliefs. Facebook encourages prolonged engagement by fostering interactions that elicit strong emotions and reactions.
What and Why: Understanding the Necessities
The authors present three formulas for the “Progressive Movement.” The first is the change in narratives and norms.
The second component involves creating and nurturing balancing opposing forces. In this context, labor unions and civil society organizations play a crucial role. Germany’s dual-channel system exemplifies this well: workplace councils manage coordination at the local level, while sectoral unions handle wage negotiations across industries. Complementary policies include subsidies for worker-friendly technologies, tax reforms, worker training programs, data protection regulations, and digital advertising taxes. Additionally, wealth taxes could contribute to reducing economic disparities.
The third component is the political solutions proposed and demanded by progressives based on their research and expertise. This requires serious reform in academia. Especially in the U.S., have academics lost their independence due to funding from the private sector? For example, in the modern environmental movement, the narrative first changed regarding climate, and this change in narrative evolved into a political movement with green parties, which then pressured institutions across all sectors. These developments triggered technical and political solutions, such as implementing carbon taxes to reduce fossil fuel emissions and supporting renewable energy innovations.
In conclusion, while implementing these proposed reforms is challenging, they are essential. Technology giants, despite their controversies, are highly regarded in society, and the vision of “progress” they impose on the future of technology is rarely questioned.
I believe that, given our society’s lack of experience with unique historical processes and beliefs regarding the issue, we should address it more fundamentally. We must determine how we want to coexist and the principles we will embrace, then begin educating ourselves and our community—starting with adults—based on these principles. Whether this will be feasible remains uncertain, but it is crucial to start promptly!
Is All This True?
By the way, I should note that some commentators have criticized Acemoglu and Johnson’s book.
Deirdre N. McCloskey from the WSJ remarks: “It is normal for the authors, as economic historians, to use historical evidence in their arguments. However, they should not disregard genuine scientific insights in the process. I admire their effort to integrate historical context into their arguments, something that Mr. Acemoglu consistently does in his books. Yet, ignoring true science is disastrous. Science progresses through both hypothesis and refutation. If history is to be used, it must be tested. Mr. Acemoglu and Johnson fail to do this. The issue with the book lies in its economic data. Consider the figures: over the past two centuries, the world has radically improved according to a 3000% inflation adjustment. Even in the last twenty years, the lives of the poor have improved. The ‘great enrichment’ after 1800 and the resulting extreme abundance have lifted us from destitution. Even impoverished workers who did not benefit in the short term have gained greatly in the long run. The number of people living on $2 a day has fallen to 1 billion, with an average daily income of $50. This was not achieved by the state. Another way to understand the issue is to recall the common sense from Economics 101 and Biology 101, which emphasize the benefits of competitive entry driven by profit motives. Mr. Acemoglu and Johnson seem to have missed these fundamental lessons. The enormous wealth they devalue plays a key role in encouraging other entrepreneurs to enter the economy, which lowers the prices of goods and services, ultimately reflecting substantial increases in real income for the poor.” (**)
From an article by Ümit Alan in 10 Haber, I also learned that MIT Economics Professor David Autor has a different perspective. (***)
In his article in Noema magazine, David Autor says: “With computers, an elite class of doctors, lawyers, and software engineers has formed. AI technologies could spread these specialized jobs to the base; a new middle class could be built.” (****)
So, D. Autor suggests that a system could emerge to include the less fortunate and poorly educated, and thus not sufficiently respected, individuals.
Conclusion
Will those who control technology use their power to further enrich the wealthy? Or will we evolve towards a more equitable economic system that improves income distribution?
However, if the rich continue to grow richer, leading to increased poverty and the potential collapse of the middle class, on what basis will the wealthy sustain their affluence in the long term?
Furthermore, if interventions are made to address the current negative trends as suggested by the authors, who will determine the role of the state? And who will prevent the shift towards a Chinese-style surveillance system that is currently being criticized?
References
(*) Acemoğlu D., and Johnson S.(2023) İktidar ve Teknoloji -Bin Yıllık Mücadele (Power and Progress), Doğan Kitap, ss.397.
(****) https://www.noemamag.com/how-ai-could-help-rebuild-the-middle-class
Note: This open-source article does not require copyright and can be quoted by citing the author.