Power and Progress: Our Thousand-Year Struggle Over Technology and Prosperity
By Daron Acemoglu and Simon Johnson
Basic Books
ISBN: 9781399804455
546pp.

Technology changes and, sometimes, quite rapidly. But there is no inevitability about how technology changes and how technology change is utilised. Technology can be developed to automate processes and replace labour by capital, or it can be developed to facilitate what humans are doing and to increase their productivity.

“And, of course, scientific and technological progress is a vital part of that story and will have to be the bedrock of any future process of shared gains,” as Daron Acemoglu and Simon Johnson write in their recent book, Power and Progress: Our Thousand-Year Struggle over Technology and Prosperity. “But the broad-based prosperity of the past was not the result of any automatic, guaranteed gains of technological progress. Rather, shared prosperity emerged because, and only where, the direction of technological advances and society’s approach to dividing the gains were pushed away from arrangements that primarily served a narrow elite.”

A lot of this is in the hands of humans and the institutions that we build in our society. We can allow the benefits of technology to accrue in the hands of the few, or we can have counter forces that allow a much broader sharing of benefits as well.

Again, this is something that depends on the institutions that we create and nurture in our society. Technology can be allowed to reduce the effectiveness of democracy in society or it can be harnessed to make democracy more effective. As said before, the answer lies with how society and the institutions it creates deal with technology and technological change.

“A new, more inclusive vision of technology can emerge only if the basis of social power changes,” reads the book under review. And “…there is nothing automatic about new technologies bringing widespread prosperity. Whether they do or not is an economic, social and political choice.”

A well-argued new book casts an expansive look at the history of technological development and argues that whether technology ends up benefitting a few or the many is dependent on humans, their policies and the institutions they put in place

Technology can and does raise productivity. But this does not automatically translate into sharing of the benefits from this increased productivity broadly. This depends on how gains are shared between workers and firms, workers and capital and workers and managers.

Daron Acemoglu is Institute Professor of Economics at MIT. A prolific writer, Acemoglu is perhaps best known for this book Why Nations Fail: The Origins of Power, Prosperity and Poverty (2012) co-authored with James Robinson, in which the role of institutions was highlighted for understanding development, progress and prosperity. In some ways, the theme about the importance of institutions, continues in this book too.

Simon Johnson is the Ronald Kurtz Professor of Entrepreneurship at MIT and the author of books such as Jump-Starting America, White House Burning and 13 Bankers. Both of them have been working on technology-related issues for a number of years now.

Technological change is not something new. It has been with us throughout human history. Someone discovered fire, someone invented the wheel, and so on. All of these must have had profound impacts on who was doing what, what could be done, and who got the rewards from the increases in productivity.

Innovation and technology change have also continued throughout. Some of the innovation is more general purpose, such as steam engines, electricity, telephony and computers, and they not only raise productivity significantly, per worker, but also open up new areas for product development and process innovations, but also allow production or service provision to happen at a much larger scale.

On the other hand, there can be technological changes that just automate processes and so increase marginal productivity but shed labour as well. These can reduce costs for firms, but they increase inequality too. Of course, a technology might have both consequences as well.

What type of technology gets developed is not inevitable as well. It depends on the vision that the leaders of the technological change process have. How the technology gets deployed also depends on the leaders and users of technology. And how the benefits get shared or not depends on the countervailing forces in the society.

Are there labour unions to protect labour rights? Is there a welfare state looking after the interest of workers and citizens? Is there a democracy where marginalised voices get their due share of public space? Are there policies in place, in a democracy, that balance incentives for labour versus capital? Labour is taxed but capital is subsidised for most industrialists in most countries.

The book gives plenty of historical examples, from the industrial revolution onward, to make these points, and quite effectively. The period of the ‘robber barons’ in the US is an example where technological change was harnessed for the benefit of the few, and there were few countervailing forces.

The 1940s-1970s was a period where there was rapid technological change across the world, but most industrially advanced countries by this time also had universal suffrage, welfare states, strong labour unions and, sometimes, strong rights movements as well, and the benefits of technology did get shared. The levels of inequality were lower than in other periods and wages, for most of the workers, rose in real terms. This started to change from the 1980s onward again.

There has been, over the last few years, talk of the potential of Artificial Intelligence (AI) to trigger technological innovations that could have large impacts on the marginal productivity of workers. But one fear is that they would make a lot of labour redundant. The authors argue that there is no inevitability to this. Technological change would be there, but which innovations come through depends on the leaders of innovation and the incentives that are set by state policies. Whether the benefits are shared or not depends on the countervailing forces.

Right now, there are strong incentives for capital and against labour. Labour movements have been weakened. Democracies are not doing well. And the welfare state has been under attack in many, if not most, countries. Inequality has been increasing for the last few decades and the richest few, due to tremendous wealth, are wielding significant power, not only in their area of expertise — mostly technology — but in politics and other areas as well (education/health and foundations such as Melinda and Gates, etc).

How we move forward from here depends on whether we are able to reshape institutions and create balancing forces or not. Increasing inequality puts pressure for countervailing forces to develop, but it can take a long time for that to happen, as it did in the wake of the industrial revolution and in the aftermath of the first and second world wars. But this might be an objective reformers have to think about a lot harder. The book talks of some ways we could think about these aspects in today’s economy.

Since the book is about technological change, a lot of it is based in and is about Europe and the United States and, towards the end, about China. Countries that are not at the cutting edge of technology do not figure as prominently. But, as Acemoglu and Johnson argue, the impacts of technology change are felt across the world, and what happens in technology today in the advanced countries will come to the developing countries in a few years.

For countries that are labour rich, it can have quite devastating consequences. So, the arguments given in the book are very important to understand for polities across the globe. Pakistan, with its very young and mostly uneducated and untrained population, will be impacted a lot by how technology develops in the North and the West. And it is national institutions that matter in mediating the impacts of technology. Policymakers and concerned citizens should definitely have a read.

The book is very well written. It is a big book with a lot of arguments, all of which are not possible to summarise in a review. And it has a rich discussion of examples from history. But it is easy to read and to understand the main thrust of the arguments being made. And the arguments are definitely worth understanding.

The reviewer is a senior research fellow at the Institute of Development and Economic Alternatives, and an associate professor of economics at Lums. X: @BariFaisal

Published in Dawn, Books & Authors, January 21st, 2024