Power and Progress [1] is the 3rd book by Acemoglu and Robinson together, the previous two (“Why Nations Fail”, “The Narrow Corridor”) being best-sellers. Their first two books asserted that differences in political systems like democracy vs communism can explain why some countries are more productive than others. This book seeks to answer a more ambitious question: why are some people are made worse off with the introduction of more productive technology? After all, technological progress should lift the standard of living for everybody! In other words, why has inequality increased despite the right political systems such as democracy being in place?
The authors propose vision for progress and worker activism as key determinants of inequality. If the vision for innovation is automation, it will make low skilled workers unemployed. It succeeds to raise the average productivity of the economy since the same work can be done by fewer people. But it can be improved since we are not using the entire workforce available to us. A better vision is to boost productivity by making every worker productive or by creating new jobs which cannot yet be automated. A major example of the latter was railways in the 19th century which not only made transport more efficient but also created new jobs in industries like steel, chemicals, and energy.
Worker activism is important as well in order to determine how the gains from innovation will be shared between capital owners and labor. It should not be expected that technological progress mechanically benefits every section of society equally. How to share the gains is always a choice. An example illustrating the last point is the industrial revolution. It ushered in a new era of progress but the gains were limited to a handful of capital owners and not workers who were instead relegated to pathetic work conditions and low wages. Similarly, despite significant progress since the Middle Ages in agricultural techniques – for example, the development of better plows, crop rotation, and improved mills – the standard of living of farmers did not improve. Introduction of the cotton gin while increasing cotton production also enhanced the exploitation of slave laborers in 19th century US.
The authors argue that present day inequality in the US since the 1980s is due to the sole focus of digital technologies on automation. Some examples include self-checkout kiosks and AI softwares to replace radiologists for determining cancer from X–Rays. Due to automation, only skilled professions with college education are able to survive in the job market. This is complemented by the fact that labor unions have weakened since the 1980s, which has led to significant wage drops.
Adam Smith believed that better machines lead to higher wages. However, that holds true only in a perfectly competitive world where workers are paid their marginal value. In the real world, wages are negotiated between capital owners and workers and their relative bargaining powers are important for wage determination.
Current revolutions in Artificial Intelligence (AI) are actually a “so-so” gain in productivity since it is focused on automation but does not increase productivity for everyone. A recent example is Chat-GPT which can produce well written code in response to a problem statement, thereby reducing the need for software developers.
The authors laud the progress in climate change activism and suggest that the digital sector can learn from it. They document how the climate movement started by altering the narrative which was then dominated by big oil companies who denied the polluting effects of their operations. Organizations like Greenpeace initiated educational campaigns in the early 1990s. Al Gore’s 2006 film “An inconvenient Truth” also helped to publicise the issue. After this, Green parties appeared in several countries and put pressure on governments. Several strikes and school walkouts were organized in 2019. Finally, governments and oil companies were pressured into taking concrete actions such as implementing a carbon tax and environmental regulations and providing R&D support. The authors hope that similar activism can act as a countervailing force against Big Tech executives to help share the gains from progress equally.
According to me, the renewable energy industry is at a watershed moment right now. The vision of its leaders will determine whether gains from innovation will be inclusive or whether it will be restricted to a few powerful people. The cost of producing from solar and wind has dropped substantially and the capital owners of these technology have been enjoying infra-marginal rents due to the price being fixed by the least efficient technology like gas. Electric vehicles can potentially create new jobs in the lithium mining or electronics industry. The vision of the industry leaders will ultimately determine how big of a role it will play in a country’s economy.
Avishek Deb, Intern research fellow, Researcher’s communication on Twitter.
[1] Acemoglu, D. et Johnson, S.,