Acemoglu, Daron, and Simon Johnson. 2024. Power and Progress: Our Thousand-Year Struggle over Technology and Prosperity. PublicAffairs.

Notes

In-text annotations

"If we combine our machine-potentials of a factory with the valuation of human beings on which our present factory system is based, we are in for an industrial revolution of unmitigated cruelty. We must be willing to deal in facts rather than in fashionable ideologies if we wish to get through this period unharmed." (Page 11)

"Of course, problems remain, including inequality, pollution, and extremism around the globe. But these are the birth pains of a better world. In any case, we are told, the forces of technology are inexorable. We couldn’t stop them if we wanted to, and it would be highly inadvisable to try. It is better to change ourselves—for example, by investing in skills that will be valued in the future. If there are continuing problems, talented entrepreneurs and scientists will invent solutions—more-capable robots, human-level artificial intelligence, and whatever other breakthroughs are required." (Page 12)

"The panopticon’s appeal is easy to understand—if you are in charge—and was not missed by contemporaries. Better surveillance would lead to more compliant behavior, and it was easy to imagine how this could be in the broader interest of society. Jeremy Bentham was a philanthropist, animated by schemes to improve social efficiency and help everyone to greater happiness, at least as he saw it. Bentham is credited today as the founder of the philosophy of utilitarianism, which means maximizing the combined welfare of all people in society. If some people could be squeezed a little in return for a few people gaining a great deal, that was an improvement worth considering" (Page 13)

"To Jeremy Bentham, it was self-evident that technology improvements enabled better-functioning schools, factories, prisons, and hospitals, and this was beneficial for everyone. With his flowery language, formal dress, and funny hat, Bentham would cut an odd figure in modern Silicon Valley, but his thinking is remarkably fashionable. New technologies, according to this view of the world, expand human capabilities and, when applied throughout the economy, greatly increase efficiency and productivity. Then, the logic goes, society will sooner or later find a way of sharing these gains, generating benefits for pretty much everybody." (Page 14)

"We are living in an age that is even more blindly optimistic and more elitist about technology than the times of Jeremy Bentham, Adam Smith, and Edmund Burke." (Page 18)

"A new, more inclusive vision of technology can emerge only if the basis of social power changes. This requires, as in the nineteenth century, the rise of counterarguments and organizations that can stand up to the conventional wisdom. Confronting the prevailing vision and wresting the direction of technology away from the control of a narrow elite may even be more difficult today than it was in nineteenth-century Britain and America. But it is no less essential." (Page 18)

"The word technology comes from the Greek tekhne (“skilled craft”) and logia (“speaking” or “telling”), implying systematic study of a technique. Technology is not simply the application of new methods to the production of material goods. Much more broadly, it concerns everything we do to shape our surroundings and organize production. Technology is the way that collective human knowledge is used to improve nutrition, comfort, and health, but often for other purposes, too, such as surveillance, war, or even genocide." (Page 20)

"Humanity was wise enough to control the use of its knowledge, and if there were social costs of being so innovative, the solution was to invent even more useful things." (Page 21)

"The inequality implications of new technologies reach far beyond these numbers. With the demise of good jobs available to most workers and the rapid growth in the incomes of a small fraction of the population trained as computer scientists, engineers, and financiers, we are on our way to a truly two-tiered society, in which workers and those commanding the economic means and social recognition live separately, and that separation grows daily. This is what the English writer H. G. Wells anticipated in TheTimeMachine, with a future dystopia where technology had so segregated people that they evolved into two separate species." (Page 23)

"there is nothing automatic about new technologies bringing widespread prosperity. Whether they do or not is an economic, social, and political choice." (Page 23)

"Optimism regarding shared benefits from technological progress is founded on a simple and powerful idea: the “productivity bandwagon.” This idea maintains that new machines and production methods that increase productivity will also produce higher wages. As technology progresses, the bandwagon will pull along everybody, not just entrepreneurs and owners of capital" (Page 24)

"According to the conventional wisdom, to rectify the rise in inequality and build even more solid foundations for shared prosperity, workers must find a way to acquire more of the skills they need to work alongside new technologies. As succinctly summarized by Erik Brynjolfsson, one of the foremost experts on technology, “What can we do to create shared prosperity? The answer is not to slow down technology. Instead of racing against the machine, we need to race with the machine. That is our grand challenge.”" (Page 24)

"What is true of automation is true of many aspects of globalization as well. Major breakthroughs in communication tools and shipping logistics have enabled a massive wave of offshoring over the last several decades, with production tasks such as assembly or customer service being transferred to countries where labor is cheaper. Offshoring has reduced costs and boosted profits for companies such as Apple, whose products are made of parts produced in many countries and are almost entirely assembled in Asia. But in industrialized nations it has also displaced workers who used to perform these tasks domestically and has not activated a powerful bandwagon." (Page 27)

"In principle, these are decisions a society should make, collectively. In practice, they are made by entrepreneurs, managers, visionaries, and sometimes political leaders, with defining effects on who wins and who loses from technological advances" (Page 32)

"But what determines which technology vision prevails? Even though the choices are about how best to use our collective knowledge, the decisive factors are not just technical or what makes sense in a pure engineering sense. Choice in this context is fundamentally about power—the power to persuade others, as we will see in Chapter 3—because different choices benefit different people. Whoever has greater power is more likely to persuade others of their perspective, which is most often aligned with their interests. And whoever succeeds in turning their ideas into a shared vision gains additional power and social standing." (Page 35)

"In these instances, society may even become gripped by visions that favor powerful individuals. Such visions then help business and technology leaders pursue plans that increase their wealth, political power, or status. These elites may convince themselves that whatever is good for them is also best for the common good. They may even come to believe that any suffering that their virtuous path generates is a price well worth paying for progress—especially when those bearing the brunt of the costs are voiceles" (Page 38)

"Over the next three years, roughly sixty thousand men were engaged on the canal at any given time, of whom thousands might be on their way from the Nile Valley to the construction area, thousands were digging, and the rest were on their way home. Officials had to fill recruiting quotas by assigning peasants who would otherwise have been working on their own land or on local projects, and the Egyptian military was charged with bringing the workers to the canal site and supervising their manual labor." (Page 60)

"Lesseps was charismatic, entrepreneurial, ambitious. He had connections, with the power of the French state and sometimes the Egyptian state behind him. His past success was mesmerizing to many of his contemporaries. Most importantly, Lesseps was peddling a nineteenth-century version of techno-optimism: big public infrastructure investments and technological advances would benefit everybody, in Europe and globally. This vision brought the French public and the French and Egyptian decision makers on board. Without it, Lesseps would not have had the sheer force of will that made him build a canal across 120 miles of Egyptian desert, even when things started going against his initial plans. Technology is nothing without vision" (Page 73)

"The lessons from the Panama Canal debacle resonate today, on an even grander scale. As one American delegate to the 1879 Paris Congress put it, “The failure of this Congress will teach the people the salutary lesson that under the republic they must think for themselves, and not follow the lead of any man.” Alas, it is difficult to argue that this lesson has so far been learned" (Page 74)

"We are governed, our minds molded, our tastes formed, our ideas suggested, largely by men we have never heard of. —EDWARD BERNAYS, Propaganda, 1928" (Page 75)

"The direction of progress, and consequently who wins and who loses, depends on which visions society follows. For example, it was Ferdinand de Lesseps’s vision, combined with a good dose of hubris, that caused the Panama Canal debacle. What explains, then, how his vision became so dominant? Why did Lesseps’s views convince others to risk their money and lives against the odds? The answer is social power, and particularly his power to persuade thousands of small investors." (Page 75)

"Respecting social status and imitating successful people has clear evolutionary logic, for these are the people who are likely to have thrived because they have made correct choices. But the snag is also obvious. Our tendency to pay more attention to those with high status and prestige generates powerful feedbacks: those who have other sources of social power will have high status, and we will tend to listen to them more, conferring on them greater persuasion power as well." (Page 86)

"There is another reason why powerful ideas are often not the openly selfish ones. You will be a much better advocate for an idea if you passionately believe in it, and this becomes more likely if you can convince yourself that this is not just a selfish ploy, but in the name of progress. It was thus much more important for the success of this vision that bureaucrats, policy makers, and journalists who had much less direct material interests became strong proponents of the big-finance-is-good rhetoric" (Page 89)

"So far, we have explained how ideas can spread and become dominant, alongside the role of agenda setting, which confers a special position to those who can frame the debate. Who can do so? The answer is those with high social standing. Because those with social power have greater ability to set the agenda, we see a circle that can turn vicious: the more power and status you have, the easier it is for you to set the agenda, and when you set the agenda, you obtain even more status and power. Nevertheless, the rules of the game matter greatly as well, and they can amplify or limit inequality in the power to persuade." (Page 90)

"Power tends to corrupt and absolute power corrupts absolutely. Great men are almost always bad men, even when they exercise influence and not authority: still more when you superadd the tendency or the certainty of corruption by authority. There is no worse heresy than that the office sanctifies the holder of it." (Page 97)

"There is perhaps no better evidence for this type of corruption than the work of social psychologist Dacher Keltner. In experiments spanning the last two decades, Keltner and his collaborators have amassed a huge amount of data that the more powerful people become, the more likely they are to act selfishly and ignore the consequences of their actions on others" (Page 97)

"How can powerful people engage in such selfish, unethical behavior? Keltner’s research suggests that the answer may be related to self-persuasion—about what is and is not acceptable and what is in the common good. The rich and the prominent convince themselves that they are simply taking their just deserts, or even that being greedy is not beyond the pale. As the unscrupulous investor Gordon Gekko in the 1987 movie Wall Street put it, “Greed is right, greed works.” Interestingly, Keltner and his collaborators also saw that other non-rich people can be nudged to behave more like the rich when they are given statements expressing positive attitudes toward greed." (Page 98)

"What is true of social power in general becomes especially central when we turn to visions of technology. It is easy to ignore others when you have a compelling narrative about how to enhance our species’ dominion over nature. Those who do not agree with this viewpoint and those who suffer can be cast aside, with no more than lip service paid to their suffering. When a vision becomes overconfident, these problems are magnified. Now those who stand in the way or argue that there might be alternative paths can be viewed as unimportant or out of touch, if not downright misguided. They can just be crushed. The vision justifies everything" (Page 99)

"This of course does not mean that there is no way of reining in selfishness and hubristic visions. But it does very much mean that we cannot expect this type of responsible behavior to emerge automatically. As Lord Acton pointed out, we cannot count on social responsibility among those who hold great power. We can count on it even less among those who have forceful visions and dreams of shaping the future. The cards are further stacked against responsibility because the power to persuade corrupts and makes the powerful less likely to understand or care about others’ woes. We need to reshape the future by creating countervailing forces, particularly by ensuring that there is a diverse set of voices, interests, and perspectives as a counterweight to the dominant vision. By building institutions that provide access to a broader range of people and create pathways for diverse ideas to influence the" (Page 99)

"agenda, we can break the monopoly over agenda setting that some individuals would otherwise enjoy" (Page 100)

"It is equally about (social) norms—what society finds acceptable and what it refuses to consider and reacts against. It is about the pressure that ordinary people can put on elites and visionaries, and it is about their willingness to have their own opinions rather than be entrapped by dominant visions. We must also find ways of curtailing selfish, overconfident visions, and this too is about institutions and norms. Hubris is much less powerful when it is not the only voice at the table. It becomes enfeebled when it is confronted with effective counterarguments that cannot be brushed aside. It (hopefully) starts to fade when it is recognized and mocked" (Page 100)

"This democratic advantage is related to an idea proposed more than two hundred years ago by a French philosopher, the Marquis de Condorcet. Condorcet made the case for democracy using what he called a “jury theorem.” According to his theorem, a jury—for example, consisting of twelve people with different viewpoints—is more likely to reach a good decision than would a single individual. Everyone will bring their own perspective and biases, which may vary from issue to issue. If we appoint one of them as decision maker or ruler, that individual may make bad decisions. However, if we put several people with different perspectives in the room and the ultimate decision aggregates their viewpoints, under plausible conditions this is likely to lead to better decisions. Democracy, when it works well, operates like a very large jury." (Page 101)

"Our argument for democracy is a little different, though related. The democratic advantage may not be just the aggregation of separate views, but rather the encouraging of diverse perspectives to engage with and counterbalance each other. The strength of democracy is thus in the deliberation among different viewpoints, as well as in the disagreements that this often generates. Hence, as noted in Chapter 1, a major implication of our approach is that diversity is not a “nice to have” feature; its presence is necessary to counteract and contain the overconfident visions of elites. Such diversity is also the essence of democracy’s strength." (Page 101)

"Such diversity is often maligned by experts who argue that regular people cannot provide valuable inputs into highly technical matters. We are not advocating that there should be a set of citizens from all backgrounds deciding the laws of thermodynamics or the best way to design speech-recognition algorithms. Rather, different technology choices—for example, on algorithms, financial products, and how we use the laws of physics—tend to have distinct social and economic consequences, and everybody should have a say on whether we find these consequences desirable or even acceptable." (Page 102)

"This feedback is even more important when it comes to technology choices. The technological landscape not only determines who prospers and who languishes, but it also critically influences who holds social power. Those enriched by new technologies, or whose prestige and voice are magnified, become more powerful. Technological choices are themselves defined by dominant visions and tend to reinforce the power and status of those whose vision is shaping technology’s trajectory. This self-reinforcing dynamic is a type of vicious circle. Students of history and political economy have highlighted such dynamics, documenting the pathways that make the rich politically more influential and how this additional political power enables them to become richer. The same is true of the new vision oligarchy that has come to dominate the future of modern technology." (Page 104)

"From 1000 to 1300, water mills and windmills and other advances in agricultural technology roughly doubled yields per hectare. These innovations also helped kick-start English woolen cloth textiles, which later played a pivotal role in industrialization. Although it is difficult to determine exact numbers, agricultural productivity per person is estimated to have increased by 15 percent between 1100 and 1300." (Page 109)

"You might think that these technical and productivity advances would lead to higher real incomes. Alas, the productivity bandwagon —productivity increases that lift wages and workers’ living standards —did not materialize in the medieval economy. Except for those" (Page 109)

"belonging to a small elite, there were no sustained improvements in living standards and some episodes of deterioration. For most people, better agricultural technology during the Middle Ages deepened their poverty" (Page 110)

"This surplus was extracted and enjoyed by a small elite. Even under the most expansive definition, this elite, including the king’s retinue, nobles, and high clergy, made up no more than 5 percent of the population. But it still captured most of the agricultural surplus in medieval England" (Page 111)

"Most of the time, discontent never boiled up to such levels, because the peasantry was persuaded to acquiesce. Medieval society is often described as a “society of orders,” consisting of those who fought, those who prayed, and those who did all the work. Those who prayed were crucial in persuading those who labored to accept this hierarchy" (Page 114)

"However, most medieval monasteries were not into production or fighting poverty, but in the business of prayer. In these turbulent times, when the population was deeply religious, prayer was tightly linked to persuasion. Priests and the religious orders gave advice to people and justified the existing hierarchy, and more importantly they propagated a vision of how society and production should be organized." (Page 114)

"The question of whether clerical authority was superior to secular authority remained contentious throughout the Middle Ages. Archbishop of Canterbury Thomas Becket famously locked horns with Henry II over the issue. When the king insisted that serious crimes committed by clerics must be heard in the royal courts, Becket responded: “This will certainly not be done, for laymen cannot be judges of [church] clerks and whatever this or any other member of the clergy has committed should be judged in a church court.” Becket was former lord chancellor and royal confidant to the king, and he saw himself as standing up for liberty—or one form of liberty—against tyranny. The king saw this stance as a betrayal, and his fury eventually resulted in Becket’s killing. But this royal use of force backfired, in the sense that it only increased the church’s persuasion power and ability to stand up to the king. Becket came to be regarded as a martyr, and Henry II had to pay public penance at his tomb. The tomb remained an important shrine until 1536, when, influenced by the Protestant Reformation and wanting to get remarried, Henry VIII turned against the Catholic Church" (Page 115)

"Mills represented a significant investment, and in an economy where landowners had grown larger and politically stronger, it was natural that they would be the ones making these investments, and in a way that further strengthened their hand against the peasants." (Page 116)

"Although mills save labor in various tasks such as grinding corn, they also increase the marginal productivity of workers. According to the productivity bandwagon perspective, employers should hire more people to work in the mills, and competition for workers should push wages up. But as we have seen, the institutional context matters enormously. Greater demand for workers leads to higher wages only when employers compete to attract labor in a well-functioning, noncoercive labor market." (Page 116)

"But why would the introduction of new machines and the resulting higher productivity lead to more squeezing of peasants and worse living standards? Imagine a setting in which new technologies raise productivity but lords cannot (or do not want to) hire additional workers. They still would like to have more work hours to go with their more productive technology. How to achieve this? One way, often ignored in standard accounts, is to increase coercion and squeeze more labor out of existing workers. Then productivity gains benefit landowners but directly harm workers, who now suffer both greater coercion and longer work hours (and possibly even lower wages)." (Page 117)

"alternative interpretation of stagnant living standards during the Middle Ages is rooted in the ideas of Reverend Thomas Malthus. Writing at the end of the eighteenth century, Malthus argued that the poor were feckless. If you gave them enough land for a cow, they would just have more children. As a result, “Population, when unchecked, increases in a geometrical ratio. Subsistence increases only in an arithmetical ratio. A slight acquaintance with numbers will shew the immensity of the first power in comparison of the second.” Because there was a limit on available land, an increase in the population would increase agricultural output by less; consequently, any potential improvement in living standards for the poor would not last and would be quickly eaten up by more mouths to feed." (Page 119)

"This uncharitable view, which blames the poor for their misery, does not fit the facts. If there is any kind of Malthusian “trap,” it is the trap of thinking that there is an inexorable law of Malthusian dynamics. The poverty of the peasantry cannot be understood without recognizing how they were coerced—and how political and social power shaped who benefited from the direction of progress. During the thousands of years before the Industrial Revolution, technology and productivity were not stagnant, even if they did not improve as steadily and rapidly as they did after the middle of the eighteenth century." (Page 120)

"Some claim that permanent villages came first, followed by the emergence of social hierarchy. Others point to signs of hierarchy in goods found in graves that predate settlements by thousands of years. Some join the famous archaeologist Gordon Childe, who coined the term Neolithic Revolution to describe this transition, seeing it as foundational to the advancement of technology and humanity. Yet others follow JeanJacques Rousseau and maintain that settling down to till fields fulltime was human society’s “original sin,” paving the way to poverty and social inequality" (Page 124)

"We do not know the living conditions of early agriculturalists with any certainty. But under the auspices of early centralized states, most people engaged in full-time grain cultivation seem to have been decidedly worse off than their foraging ancestors. Existing estimates indicate that foragers worked somewhere around five hours per day, ate a wide variety of plants and plenty of meat, and had healthy lives, achieving levels of life expectancy at birth that ranged from twenty-one to thirty-seven years. Infant mortality rates were high, but people who reached the age of forty-five could be expected to live another fourteen to twenty-six years. Settled grain cultivators worked probably twice as much, more than ten hours per day. The work became much harder as well, especially after grains emerged as the main crop. There is plenty of evidence suggesting that their diets deteriorated, compared with the less settled lifestyle. As a result, farmers were shorter by four or five inches, on average, than the foragers and had significantly more skeletal damage and much worse dental problems. Farmers also suffered more from infectious disease and died younger than their foraging cousins. Their life expectancy at birth is estimated to have been around nineteen years." (Page 127)

"No one knows exactly what motivated ancient people; we cannot see inside the minds of farmers who lived two thousand or seven thousand years ago, and they did not leave written records of their aspirations or plight. It seems likely that organized religion helped convince them that this life was appropriate or indeed their unavoidable fate. Centralized farming cosmologies are quite clear that there is a hierarchy, with gods at the top, kings and priests in the middle, and peasants firmly at the bottom. The reward for not complaining varies across belief systems, but in general it is some form of deferred compensation. The gods have assigned you this role, so shut up and get back to work in the fields." (Page 129)

"The Egyptian ruling elite lived in towns and comprised some combination of priestly hierarchy and “divine kings,” claiming legitimacy or even direct descent from the gods. This pattern is not unique to Egypt. Temples and other monuments appear in most early civilizations and typically for the same reasons as the medieval church constructed cathedrals—to legitimize the rule of the elite by honoring their deity and to maintain people’s faith." (Page 130)

"Indeed, technological progress was now doing the bidding of the Soviet leadership, whose grip on power would have been hard to maintain without some increase in economic output. All the same, whether the elite were feudal lords in medieval Europe, plantation owners in the US, or Communist Party bosses in Russia, technology was socially biased, and its application in the name of progress left devastation on its way" (Page 143)

"Technological changes have always been with us, along with influential people making decisions about what needs to be done and by whom. Over the past twelve thousand years, agricultural technology has advanced repeatedly and sometimes in dramatic ways. There have been times when, as productivity rose, ordinary people also benefited. But there was nothing automatic about these improvements trickling down to benefit the greater number of people. Shared benefits appeared only when landowning and" (Page 144)

"religious elites were not dominant enough to impose their vision and extract all the surplus from new technologies." (Page 145)

"People like Stephenson were a new breed. The Middle Ages, as we have seen, was a time of rigid hierarchy, where everyone had their place. The scope for upward social mobility was limited. But by the mid-1700s, the “middling sort” of people—from modest origins but viewing themselves firmly in the middle class—could dream big and rise fast in Britain. Three things were remarkable about this. The first was that they aspired to rise in a way that may reasonably be considered unprecedented for people of modest social standing in preindustrial Europe. The second was that those ambitions so often centered around technology, how it could solve practical problems and make them rich and famous. They also acquired a range of mechanical skills to put these dreams into practice. The third, and the most remarkable one, was that British society let them realize these dreams" (Page 158)

"By the mid-nineteenth century, tens of thousands of middlestatus Britons had formed the idea that they could rise substantially above their station through entrepreneurship and command of technologies. Other parts of Western Europe saw a similar process of social hierarchies loosening and ambitious men (and rarely women in those patriarchal times) wishing to gain in wealth or status. But nowhere else in the world at that time do we see so many middleclass people trying to pierce through the existing social hierarchy. It was these middling sort of men who were critical for the innovations and the introduction of new technologies throughout much of the eighteenth and nineteenth centuries in Britain" (Page 173)

"By the end of Henry’s rule, many of the foundations of the medieval society of orders were crumbling. But the fruits of this transformation can be more easily seen during Elizabeth I’s long reign, between 1558 and 1603. A strong merchant class, especially in London and other port cities, was already evident in these decades and was becoming more assertive and active in overseas trade. The changes in the countryside may have been even more momentous. This is the period during which we see the emergence of the yeoman farmers and skilled artisans as both economic and social forces" (Page 176)

"If you wanted to move up socially, you needed to acquire wealth. Conversely, if you could acquire wealth, there was no limit on how high you could rise. And, in the rapidly changing British economy of the eighteenth century, wealth was not tied just to land ownership. One could make money through trade or by building factories, and social status would follow. In this relatively fluid environment, it was natural for many ambitious men from modest origins to strive to succeed within a modified version of the existing order rather than try to overthrow the entire social edifice." (Page 180)

"With this vision, it was entirely natural for this aspirant class to focus on accumulating wealth without worrying about improving the living standards of their employees and their broader community. Consequently, as we will see in Chapter 6, industrial entrepreneurs’ choices of technology, organization, growth strategy, and wage policies enriched themselves while denying their workers the benefits of productivity increases—until the workers themselves had enough political and social power to change things." (Page 181)

"The English word factory is derived from a Latin root that means either an oil press or a mill. In the 1500s the term was used to designate an office or trading post that could be quite small. As a “building for making goods,” the meaning can be traced back to the early 1600s. Starting about 1721, the word came to represent something quite new: a place where large numbers of people, many of them women and children, gathered to work with machines. Early textile factories employed as many as a thousand people and broke tasks down into simple components, emphasized repetitive motion, used strong discipline to keep everyone working together, and, of course, significantly reduced worker autonomy." (Page 190)

"There was a wave of machine breaking in 1811‒1812 by groups of textile workers calling themselves Luddites, after Ned Ludd, an apocryphal character who was supposed to have broken knitting frames in 1779. The Luddites were clear that they were not plunderers and thieves. A letter from Nottinghamshire Luddites stated that “plunder is not our object, the common necessaries of life is what we at present aim at.” No matter, the government response was to propose capital punishment when the previous maximum penalty had been forced deportation to Australia." (Page 193)

"The rejected workmen, in the blindness of their ignorance, instead of rejoicing at these improvements in arts so beneficial to mankind, conceived themselves to be sacrificed to improvements in mechanism. In the foolishness of their hearts, they imagined that the maintenance and well doing of the industrious poor, were objects of greater consequence than the enrichment of a few individuals by any improvement in the implements of trade which threw the workmen out of employment, and rendered the labourer unworthy of his hire." (Page 193)

"On every side the onward march of Invention is constant, rapid, inexorable. The human Reaper of thirty years ago, finds to-day a machine cutting grain twenty times as fast as ever he could; he gets three days’ work as its waiter where he formerly had three weeks’ steady harvesting: the work is as well done as of old, and far cheaper; but his share of the product is sadly diminished. The Planing Machine does the work of two hundred men admirably, and pays moderate wages to three or four; the Sewing Machine, of moderate cost, performs easily and cheaply the labors of forty seamstresses; but all the seamstresses in the world probably do not own the first machine." (Page 194)

"Pure automation is different because it does not increase workers’ contribution to output and hence does not create the need for additional workers. For this reason, automation tends to have more acute consequences for the distribution of income, creating big winners, such as owners of the machines, and many losers, including those displaced from their jobs. It is for this reason that the productivity bandwagon effect is weaker when there is a lot of automation going on." (Page 194)

"The theorists in political economy attach more importance to the aggregate accumulation of wealth and power than to the manner of its diffusion, or its effects on the interior of society. The manufacturer possessed of capital, and the inventor of a new machine, study only how to turn them to their own profit and advantage" (Page 195)

"Thomas Macaulay’s History of England, first published in 1848, sums up recent British history this way: For the history of our country during the last hundred and sixty years is eminently the history of physical, of moral, and of intellectual improvement. Those who compare the age on which their lot has fallen with a golden age which exists only in their imagination may talk of degeneracy and decay: but no man who is correctly informed as to the past will be disposed to take a morose or desponding view of the present. This rosy view reflects what is known more broadly as the Whig interpretation of history and is related to the more modern economic assumption of a self-acting productivity bandwagon. Both perspectives are based on the idea that progress eventually brings good things to most people." (Page 200)

"Industrialists such as Arkwright pried open existing hierarchies in the early 1800s not because they wanted to bring down social barriers or create true equality of opportunity, certainly not for the “meaner sort” of people. Rather, the rising middling-sort entrepreneurs wanted to pursue their own opportunities, move up, and become part of the upper crust of society. The vision they developed reflected and legitimized this drive. Efficiency was key, as the prevailing argument went, and it was in the national interest. New technological, economic, and political leaders were the vanguards of progress, and everybody would benefit from this progress, even if they did not fully understand it." (Page 201)

"The first was the government had no business interfering in contracts between consenting adults. If people agreed to work long hours under unhealthy conditions, that was their business. There was legitimate public concern for the lives of children, but adults were on their own. The second was that the value of any policy could be assessed by adding up how much was gained or lost by the individuals involved. Hence, if the reform of working conditions for children would result in gains for them, this could and should be weighed against what the losses would be for their employers. In other words, even if the gains for the children from a new policy were substantial—for example, because of improved health or schooling—this policy" (Page 201)

"should not be adopted if the losses for the employer, primarily in terms of profits, were larger." (Page 202)

"Is this, then, a vindication of the Whig interpretation of history? Not at all. There was nothing automatic about any of the improvements that ushered in a broader sharing of productivity gains and the cleanup of cities. They resulted from a contested process of political and economic reforms." (Page 203)

"In sum, nineteenth-century British railways represent an archetype of a systemic transformative technology that increased productivity both in transport and across several other sectors, and also generated new opportunities for labor." (Page 204)

"The American path of technology was targeted at increasing efficiency and contributed to higher worker marginal productivity. As this technology spread in Britain and Europe, it further raised labor demand in these economies. The United States was abundant in land and capital, but scarce in labor, especially skilled labor. The small number of artisans who emigrated to America enjoyed higher wages and bargaining power than they did back at home. This high cost of skilled labor meant that American inventions often prioritized not just automation but also finding ways to boost the productivity of lower-skilled workers." (Page 206)

"Whitney himself described his objective as “to substitute correct and effective operations of machinery for that skill of the artist which is acquired only by long practice and experience; a species of skill which is not possessed in this country to any considerable extent" (Page 207)

"Technological change is never enough by itself to raise wages, however. Workers also need to get more bargaining power vis-à-vis employers, which they did in the second half of the nineteenth century. As industry expanded, firms competed for market share and for workers. Workers began to obtain higher wages through collective bargaining. This was the culmination of a long process that had started at the beginning of the century and reached fruition only in 1871, when trade unions became fully legal. This institutional transformation strengthened and in turn was supported by a broader push for political representation." (Page 209)

"A first step in this process was the realization that, in the name of progress, much of the population was being impoverished. A second was for people to organize and exercise countervailing powers against those who had control over the direction of technology and enriched themselves in the process." (Page 210)

"The People’s Charter, drafted in 1838, focused on political rights. At that time, only about 18 percent of the adult male population in Britain had the right to vote, up from less than 10 percent before the 1832 Reform Act. The driving force of Chartism was the creation of a more radical Magna Carta, focused on the rights of ordinary people. The six demands of the People’s Charter were the right to vote for all men over the age of twenty-one, no property ownership requirement to become a member of Parliament, annual parliamentary elections, division of the country into three hundred equal electoral districts, payment of members of Parliament, and secret ballots" (Page 210)

"Chartist demands seem entirely reasonable today, and they gathered strong backing at the time, receiving more than three million signatures in support. But the Chartists ran into stiff opposition from the people who controlled the political system. All the Chartists’ petitions were rejected by Parliament, which refused to consider any legislation to improve representation. After several Chartist leaders were arrested and imprisoned, the movement lost steam and disintegrated in the late 1840s. Yet the demand for political representation among the working classes did not disappear with the demise of the Chartists. Their baton was picked up by the National Reform Union and the Reform League in the 1860s. In 1866 riots broke out in Hyde Park as people organized for political reform. In response, the Second Reform Act of 1867 extended the right to vote to male heads of households over age twenty-one and male lodgers paying at least ten pounds per year in rent, doubling the electorate. The 1872 Reform Act introduced the secret ballot. And in 1884, legislation extended the franchise further, enabling about two-thirds of men to vote. The Chartists also broke new ground in terms of organizing workers, and the rise of the trade union movement proved to have staying power. Although workers organized and went on strike, forming labor unions for collective bargaining was in principle illegal in the first half of the nineteenth century. Changing this became one of the main political aims of the reform movement that started with the Chartists." (Page 211)

"There were also major changes in how government operated. Pressure for democratization was an important element here. Fear of full-fledged democracy was a major motivation in the minds of even the most conservative politicians, encouraging incremental reforms through legislation. In advance of introducing the First Reform Act of 1832, which increased the electorate from 400,000 to more than 650,000 and reorganized constituencies to be more representative, Whig prime minister Earl Grey declared: “I do not support—I have never supported universal suffrage and annual Parliaments, nor any other of those very extensive changes which have been, I regret to say, too much promulgated in this country, and promulgated by gentlemen from whom better things might have been expected.”" (Page 212)

"But starting in mid-century, some officials began to gain a degree of autonomy and pursue what could reasonably be regarded as a broader social interest. Benthamite ideas of social efficiency had previously been used to justify policies that can only be described as mean. As better data were collected, it became clear that the market process would not necessarily lead to improvement in social conditions, which was exactly the lesson drawn from the Royal Commission on children’s work" (Page 213)

"Sanitation is a perfect example of this shift. As we have seen, by the 1840s, burgeoning British manufacturing cities had become cesspools, and most people’s living quarters were rife with deadly bacteria and other pathogens. With waste from backyard privies that were seldom emptied, the stench became unbearable, barely imaginable by anyone alive today. Sewers existed in some places, but these were designed mostly to handle rainwater and prevent flooding. For a long time, there were no attempts to improve public infrastructure. In fact, in many jurisdictions it was illegal to connect flushing toilets to sewers" (Page 213)

"We can follow the frontier of technological advances of the nineteenth century across Britain and the United States. But it would be wrong to think that innovations had their most consequential effects in these economies. Nor is it reasonable to presume that new technology’s impact was similar across places. Countries made different choices on how to use the available technological knowhow, with very distinct implications." (Page 214)

"In fact, even technologies that created the beginnings of shared prosperity in Britain could, and did, plunge hundreds of millions of" (Page 214)

"people around the world into deeper misery. This can be seen most clearly for people caught up in the rapidly expanding global web of raw materials and manufactured goods." (Page 215)

"In 1700 India had some of the most advanced ceramics, metalworking, and printed textile products in the world, all produced by highly skilled artisans who were well paid by the standards of the time. The much coveted “Damascus steel” was from India, and its calico and muslin were greatly prized in England. In response, the English woolen goods industry lobbied successfully for import restrictions in order to keep out the high-quality Indian textiles. Despite being established to pursue the spice trade, in its early years the East India Company’s commercial success was based on bringing finished cotton textiles and clothing into Britain. The company also organized production of cotton clothing in India because that is where skilled workers and the raw materials were. In the first hundred or so years of British control over parts of India, exports of finished cotton goods to Europe rose. Then came the innovation of harnessing waterpower for operating machines that could spin initially silk (to be used with cotton) and subsequently cotton itself. Britain had fast-moving water and plenty of capital willing to invest. The cost of transporting raw cotton to Liverpool was low relative to the price of the final product. The East India Company had prevented the export of cotton goods back to India. But this part of its monopoly on trade ended in 1813, resulting in a massive inflow of textiles, particularly from Lancashire, into the Indian market. This was the beginning of the deindustrialization of the Indian economy. By the second half of the 1800s, domestic spinners supplied no more than 25 percent of the country’s market, and probably less. Village artisans were driven out of business by cheap imports and had to fall back on growing food or other crops. India deurbanized from 1800 to 1850, with the share of population living in urban areas declining from around 10 percent to under 9 percent." (Page 215)

"Members of the British elite were convinced that they should remake Indian society, purportedly to civilize it, but in reality for their own ends" (Page 215)

"But instead of economic modernization, railways brought British economic interests, and they intensified control over the Indian population. In his memorandum of April 20, 1853, which shaped policy in the subcontinent for nearly a century, Dalhousie made the case for rail in three parts: to improve access to raw cotton for Britain; to sell “European” manufactured goods in more remote parts of India; and to attract British capital in railway undertakings, hoping that this would subsequently lead to engagement in other industrial activities" (Page 216)

"Indian railways did increase internal trade, allowing for a reduction in price differences across faraway places. There was also some boost to agricultural incomes. Bullocks were not an effective substitute means of transportation, and the inland waterway system was not competitive. But there was no significant impact on the iron and steel industry, and most of the rolling stock for Indian railways was purchased from Britain. In 1921 India was still not able to build locomotives" (Page 216)

"Even worse, the railways became an instrument of oppression, both by commission and omission. The commission was explicit: rail" (Page 216)

"was used to move troops around the country in response to local trouble. A good railway network can reduce the cost of repression, and this was a key part of how a few thousand British officials could rule over a population of more than three hundred million. The omission part was more horrific. When famine struck in various parts of the country, it would have been possible to bring food in by rail. However, at key moments in the 1870s and again in Bengal in the 1940s, under Winston Churchill’s wartime administration, the British authorities declined to do so, and millions of Indians died." (Page 217)

"Plenty of excuses were, and still are, given, but the fact remains that the British never invested enough in irrigation, inland waterways, and clean water, and they never focused the power of railways on feeding people at times when they had no other sources of food or could not afford what was provided by the market. The British attitude was well summarized by Churchill’s response in 1929, when he was asked to meet leaders from India’s independence movement to become better informed about changes in the country: “I am quite satisfied with my views of India. I don’t want them disturbed by any bloody Indian.” Eventually, rail links became an effective element of famineprevention policy. But not until after the British left India. Technology has huge potential to raise productivity and can improve the lives of billions of people. But, as we have seen, the path of technology is often biased and tends to deliver benefits mainly to those who are socially powerful. Those without political participation or voice are often left behind." (Page 217)

"The Whig view of history is comforting but misleading. There is nothing automatic about the “progress” part of technological progress." (Page 217)

"The second half of the nineteenth century was different, but not because there was an inexorable arc bending toward progress. What set this period apart was a change in the nature of technology and the rise of countervailing power, forcing the people in charge to get serious about sharing the benefits of higher productivity. In contrast to the drive toward automation in the first phase of the Industrial Revolution, new technologies of the second phase started creating some new opportunities for both skilled and unskilled workers. Railways generated a slew of new tasks and stimulated the rest of the economy through linkages to other sectors. Even more importantly, the American path of technology focused on increasing efficiency, especially by expanding the set of tasks that could be performed by factory workers and new machinery, largely because of the shortage of skilled workers in the country. As these innovations spread in the United States and Europe, they created new opportunities for labor and raised worker marginal productivity throughout the industrializing world. Equally, institutional changes moved in the direction of bolstering worker power so that this higher productivity would be shared between capital and labor. Industrial growth brought people together in workplaces in cities and allowed the organizing and developing of shared ideas. This changed politics both in the workplace and in the nation. In Britain, Chartism and the rise of trade unions expanded political representation and transformed the scope of government action. In the United States, union organization combined with farmer protests did the same. Throughout Europe, the rise of factories meant that it was easier to organize workers. More democracy helped greatly with the sharing of productivity gains as it facilitated collective bargaining for better working conditions and higher wages. With new industries, products, and tasks increasing worker productivity and rents being shared between employers and workers, wages increased." (Page 218)

"Political representation also meant demands for less-polluted cities, and public health issues began to be taken more seriously. None of this was automatic, and it often occurred only after a protracted struggle. Moreover, conditions improved only for those who had sufficient political voice. Women did not have the right to vote in most places during the nineteenth century; consequently, economic opportunities and broader rights for them were much slower to arrive. Even more jarringly, conditions in most European colonies, rather than improving, significantly deteriorated. Some, such as India, were forcefully deindustrialized when British textiles flowed into the country. Others, India and parts of Africa included, were turned into raw-material suppliers to meet the ferocious appetite of growing industrial production in Europe. And yet others, like the US South, saw the intensification of the worst type of coercion toward labor in the form of slavery, as well as vicious discrimination against native populations and immigrants, all in the name of progress" (Page 219)

"These building blocks were put in place during the 1910s and 1920s, suggesting that we should view the first seven decades of the twentieth century as part of the same epoch, albeit with significant reversals along the way. Studying these two building blocks, and the vision that developed alongside, provides not only clues about how we can rebuild shared prosperity today; i" (Page 222)

"The productivity bandwagon depends on new tasks and opportunities for workers and an institutional framework that enables them to share some of the productivity gains." (Page 225)

"The manufacturers judge that the movement [of adopting industrial machines] has been advantageous to workmen, as sellers of labor, because the level of salaries has been raised, as consumers of products, because they purchase more with the same sum, and as laborers, because their task has become less onerous, the machine doing nearly everything which requires great strength; the workman, instead of bringing his muscles into play, has become an inspector, using his intelligence." (Page 225)

"Nevertheless, demand for employees increased significantly in American industry around the turn of the twentieth century. In fact, the numbers on the labor share of national income indicate that labor became more central to the production process in the early twentieth century, raising its share of national income. Why? Another fundamental change in the organization of production is a large part of the answer. Concurrent with the rise of electric power in manufacturing came an elevated role for engineers and whitecollar workers, who restructured factories and the production process, with better consequences for productivity and labor." (Page 229)

"US factories in the 1850s looked like their British counterparts. An entrepreneur who had invested the capital and arranged to install the machinery managed the workforce. Some early manufacturers, like Richard Arkwright, excelled at introducing new production techniques. But in general, there was little by way of production planning, information collection, efficiency analysis, and continuous improvement. Accounting and inventory control were haphazard. There was insufficient attention to design and almost none to marketing. The organizational aspects of industry started changing in the last decades of the nineteenth century, heralding the onset of the age of engineer-managers." (Page 229)

"Managers and engineers could have chosen to double down on automation as a method to cut costs in existing industries. Instead, they built on the American path of technology and pushed to build new systems and machinery, increasing efficiency and in the process augmenting the capabilities of both skilled and unskilled labor. These technological choices were foundational to the increase in demand for workers in industry, which more than made up for declining labor intensity in agriculture and in some manufacturing tasks." (Page 231)

"Ford was not motivated by altruism. He adopted these measures because he believed that higher wages would reduce turnover, limit strikes, prevent costly stoppages of the assembly line, and increase productivity. Many leading companies followed suit, introducing their own version of high-wage policies and amenity programs. Alexander summarized the essence of this new approach, arguing that “whereas laissez faire and intensive individualism marked the economic life of the first half of the history of the United States, the emphasis is now shifting towards a voluntary assumption of social obligations, implied in the direction of economic activities and of national and international and cooperative effort in the common interest" (Page 237)

"The economic hardships and incompetence, and in the eyes of many, indifferent policy reactions, paved the way to an almost complete loss of legitimacy of established parties and the rise of the National Socialist (Nazi) Party. The Nazis were no more than a fringe political movement, receiving only 2.6 percent of the national vote share in the 1928 election before the Depression. Their vote share shot up in the first election after the Depression and reached 37.3 percent in July 1932. In November 1932, the Nazis lost ground but still won 33.1 percent of the vote, and in January 1933 Adolf Hitler became chancellor" (Page 238)

"As important as the macroeconomic responses was the new institutional structure that the SAP was building. The solution it came up with for institutionalizing rent sharing was to bring the government, trade unions, and businesses together to reach mutually beneficial bargains, which would secure equitable distribution of productivity gains between capital and labor. The business community was at first opposed to this corporatist model, viewing the labor movement in the same way that their German and American counterparts did—something to be avoided to keep costs low and maintain control in workplaces. But that started changing after the 1936 elections, which witnessed further gains for the SAP. The business community saw the writing on the wall; it would not be able to bring down the SAP by sheer opposition." (Page 240)

"The most important elements were industry-level wage setting, ensuring that profits and output increases were shared with workers, and significant expansion of redistributive and social insurance programs, along with government regulations. This was not a deal to expropriate the business community, however. There was general agreement that private businesses had to remain productive, and this would be achieved by technological investments." (Page 241)

"Remarkably, therefore, the corporatist model that SAP and the trade unions put together in Sweden achieved some of the aspirations of the vision of welfare capitalism that people such as J. R. Commons were articulating in the United States. The difference was that welfare capitalism coming purely as a voluntary gift from corporations was highly contingent and often ran into resistance from managers intent on increasing profits and reducing wages. When embedded in an institutional framework bolstering the countervailing powers of workers and including the regulatory capacity of the state, it was on much firmer ground" (Page 241)

"At the beginning of the twentieth century, Sweden was an extremely unequal place. The share of the richest 1 percent of the country in national income was over 30 percent, which made it more unequal than most European countries. In the decades after the basic institutional structure of this new coalition was established, employment and productivity grew rapidly, but inequality declined. By the 1960s, Sweden had become one of the most equal countries in the world, with the share of the top 1 percent of the population hovering around 10 percent of national income." (Page 242)

"A major policy initiative of the FDR administration was the Wagner Act of 1935, which recognized the right of workers to collectively organize (without intimidation and threat of firing from employers) and introduced various arbitration procedures to resolve disputes. Even before the Depression, some intellectuals and businesspeople were acknowledging that without collective bargaining, productivity gains would not be shared fairly, even if companies such as Ford raised wages to reduce turnover." (Page 243)

"The Allies won World War II on the back of the United States throwing its entire economy into war production. Factories that had made washing machines now produced munitions. Landing craft were manufactured by the thousands. The US had started the war with six aircraft carriers. By early 1945, it was producing one highly effective, even if smaller, carrier every month." (Page 245)

"Mass-production methods were already well established in the automobile industry, and they spread throughout American industry after the war. Car manufacturing itself continued to expand rapidly. In the 1930s, the United States produced an average of about three million automobiles every year. By the 1960s, production had increased to almost eight million. It is not an exaggeration to say that America made the automobile but then the automobile remade America." (Page 246)

"For one, inequality fell rapidly during and after World War II. The share of the top 1 percent of the income distribution was down to less than 13 percent by 1960, from its high of 22 percent in the 1920s. Other aspects of inequality during the postwar years declined as well, in part because of tighter regulations and price controls. Two researchers who studied this episode were so struck by the declines in inequality during this era that they dubbed it the “Great Compression.”" (Page 247)

"What was the secret sauce of shared prosperity in the decades following World War II? The answer lies in the two elements we emphasized earlier in this chapter: a direction of technology that created new tasks and jobs for workers of all skill levels and an institutional framework enabling workers to share productivity increases with employers and managers." (Page 247)

"The war effort multiplied what the Department of Defense was willing to spend on science and technology, and a significant portion went to computers and advancing the digital infrastructure." (Page 249)

"Yet it would be incorrect to think that postwar technology was preordained to go in a direction that created new tasks to compensate for the ones that were being rapidly automated away. The contest over the direction of technology heated up as an integral part of the struggles between labor and management, and advances in worker-friendly technologies cannot be separated from the institutional setup that induced companies to move in this direction, especially because of the countervailing powers of the labor movement." (Page 251)

"The labor movement listened and showed that it meant business right after the war. The United Auto Workers (UAW) demanded large wage hikes from General Motors in their first postwar contract negotiation. When GM did not accept, a major strike ensued. The automobile sector was not alone. The same year, 1946, witnessed a broader wave of strikes, which the Bureau of Labor Statistics called “the most concentrated period of labor-management strife in the country’s history.” For example, an electrical workers’ strike paralyzed another behemoth of American manufacturing, General Electric." (Page 251)

"The ruling’s implications were sweeping. GM was required to provide additional training and pay higher wages to the operators of the numerically controlled machinery. The general lesson was that the operator “has to acquire additional skills to handle the numerical control systems,” and “the increased effort required of the workers put on automated machines entitles them to higher rates of pay.” In fact, for unions the central issue was worker training. They insisted on training provisions to ensure that workers could be brought up to the necessary skill level to operate the new machinery and benefit from it" (Page 252)

"This led to the ILWU policy of encouraging the introduction of new technology but in a way that was beneficial to the workers, especially their members. In 1956 the negotiating committee of the union recommended: “We believe that it is possible to encourage mechanization in the industry and at the same time establish and reaffirm our work jurisdiction, along with practical minimal manning scales, so that the ILWU will have all of the work from the railroad tracks outside the piers into the holds of the ships.”" (Page 253)

"Britain, even if spared the ravages of occupation, was also suffering from the aftermath of the war. The nation had fallen behind in terms of adopting modern appliances. Few households had refrigerators and ovens, already standard in North America, and only half of the houses had indoor plumbing with hot wate" (Page 255)

"Out of these ashes of war came something quite unexpected. The next three decades witnessed breakneck-paced economic growth in much of Europe, from Scandinavia to Germany, France, and Britain. GDP per capita in real terms increased at an average rate of around 5.5 percent in Germany between 1950 and 1973. The same number was just over 5 percent for France, 3.7 percent for Sweden, and 2.9 percent for the UK. In all these cases, growth was remarkably broadly shared. The share of top 1 percent households in national income, which in the late 1910s hovered above 20 percent in Germany, France, and the UK, fell to less than 10 percent in the 1970s in all three countries" (Page 255)

"The foundations of this shared prosperity were no different than what happened in the United States. The first leg was provided by technologies that were broadly labor-friendly, creating new tasks at the same time as they were automating work. Here, Europe followed the United States, which had pulled even further ahead of the Continent in terms of industrial technology. Advances that were implemented in America spread to Europe, and industrial technology and mass-production methods were adopted rapidly. There were all sorts of incentives for European companies to embrace these technologies, and the postwar reconstruction program under the auspices of the Marshall Plan provided an important framework for technology transfer. So did many European governments’ generous support for research and development." (Page 255)

"In most of Europe, as in the US, this path of economic development was bolstered by increasing educational investments and worker-training programs, which ensured that there were workers with the skills to fill the new positions. As high-earning workers became the middle class, they boosted the demand for the new products and services that their industries were starting to mass-produce" (Page 256)

"Ancient Greeks and Romans experienced hundreds of years of growth before the modern era, but this growth was much slower, in the range of about 0.1‒0.2 percent a year. It was also based on savage exploitation of excluded groups, most importantly an army of slaves and large numbers of noncitizens working as forced laborers in both Greece and Rome. Patrician or aristocratic classes were the main beneficiary of this growth, although a broader cadre of citizens experienced some prosperity as we" (Page 257)

"The health of the population improved tremendously as well. Conditions were not as bad in the UK and elsewhere as they had been in the early nineteenth century. Nevertheless, infectious diseases were common in the first half of the twentieth century, and their burden fell much more heavily on the poor. This changed in the decades following World War II. Life expectancy at birth in Britain increased from fifty years in 1900 to seventy-two in 1970. In the United States, the increase was similar, from forty-seven in 1900 to seventy-one in 1970, and in France, from forty-seven to seventytwo. In all cases, improvements in health care and health conditions for the working classes, thanks to investments in public health and hospitals and clinics, drove the change. We should not get carried away with this upbeat assessment. Even as an unparalleled episode of shared prosperity transpired in the Western world, three groups were excluded from both political power and some of the economic benefits: women; minorities, especially Black Americans in the US; and immigrants" (Page 258)

"The biggest excluded groups from the shared prosperity of these decades were not inside but outside Europe and North America. A few non-Western countries, such as Japan and South Korea, grew fast and achieved some amount of shared prosperity. Notably, this was based on adopting and sometimes improving on the largescale industrial production systems developed in the United States. It was also supported by domestic arrangements that encouraged an equitable split of the fruits of growth. In Japan, long-term employment relationships and accompanying high-wage policies were critical for the sharing of the gains from growth. In South Korea, shared prosperity owed much to the threat from North Korea and the labor movement’s strength, especially after the country democratized in 1988." (Page 259)

"But the East Asian experience was the exception, not the rule. The populations of remaining European colonies had little voice and little chance at shared prosperity. Independence, which arrived for most colonies between 1945 and 1973, did not mean the end of misery, violence, and repression. Many of the former European colonies soon discovered that colonial institutions fell into the hands of authoritarian rulers, who used the system they inherited to enrich themselves and their cronies, and squeeze everyone else. Europe stood back from this, sometimes providing support to kleptocrats in order to access natural resources" (Page 259)

"Meanwhile, another, equally fateful limit to progress was brewing at home. The economic model underlying shared prosperity was being increasingly challenged in the United States, and the balance of power gradually shifted away from labor and government regulation after the direction of technology moved toward greater automation" (Page 260)

"The good news about computers is that they do what you tell them to do. The bad news about computers is that they do what you tell them to do." (Page 261)

"Key to this ethic was decentralization and freedom. Hackers felt great disdain for the major computer company of that era, IBM (International Business Machines). In their view, IBM wanted to control and bureaucratize information, whereas they believed that access to computers should be completely free and unlimited. Anticipating a mantra that would later become much misused by tech entrepreneurs, hackers argued that “all information should be free.” Hackers mistrusted authority, so much so that there was an almost anarchist element to their thinking." (Page 262)

"With the most promising technology of the era in the hands of visionaries like this, an astute contemporary could have reasonably predicted that the next several decades would further bolster countervailing powers against big business, create new productive tools for workers, and lay the foundations of even stronger shared prosperity. In the event, something very different transpired, and digital technologies became the graveyard of shared prosperity. Wage growth slowed down, the labor share of national income declined sharply, and wage inequality surged starting around 1980. Although many factors, including globalization and the weakening of the labor movement, contributed to this transformation, the change in the direction of technology was most important. Digital technologies automated work and disadvantaged labor vis-à-vis capital and lowerskilled workers vis-à-vis those with college or postgraduate degrees." (Page 263)

"This redirection cannot be understood without recognizing the broader social changes taking place in the United States. Businesses became better organized against labor and government regulations, but even more importantly, a new vision maintaining that maximizing profits and shareholder values was for the common good became an organizing principle for much of society. This vision, and the massive enrichment it offered, pushed the tech community in a direction very different from the one envisaged by the early hackers. The new vision was of a “digital utopia,” based on the top-down design of software to automate and control labor." (Page 263)

"US median real wages (hourly compensation) grew at above 2.5 percent per year between 1949 and 1973. Then from 1980 onward, median wages all but stopped growing—increasing only 0.45 percent per year, even though the average productivity of workers continued to rise (with an annual average growth rate of over 1.5 percent from 1980 to the present). This growth slowdown was far from equally shared. Workers with postgraduate degrees still enjoyed rapid growth, but men with a high school diploma or less saw their wages fall by about 0.45 percent, on average, every year between 1980 and 2018." (Page 264)

"Labor’s share of national income has been on a protracted downward trend in most industrialized economies. In Germany, for example, it fell from close to 70 percent in the early 1980s to around 60 percent in 2015. At the same time, the income distribution became more skewed in favor of the very richest people. From 1980 to 2020, the share of the top 1 percent increased from about 10 percent to 13 percent in Germany, and from 7 percent to almost 13 percent in the UK. During the same period, inequality increased even in Nordic countries: the share of the top 1 percent rose from about 7 percent to 11 percent in Sweden and from 7 percent to 13 percent in Denmark." (Page 265)

"At some level, what happened is clear. There were two pillars of shared prosperity in the postwar period: alongside automation, new opportunities were created for all kinds of workers, and robust rent sharing (meaning the splitting of productivity and profit gains between capital and labor) kept wages buoyant. After about 1970, both pillars collapsed, most spectacularly in the United States." (Page 266)

"Even at the best of times, the directions of technology and high wages are contested. Left to their own devices, many managers would try to reduce labor costs by limiting wage raises and also by prioritizing automation, which eliminates labor from some tasks and weakens the bargaining power of workers. These biases then influence the direction of innovation, pushing technology more toward automation. As we saw in Chapter 7, these tendencies were partly contained by collective bargaining during the decades that followed World War II, and unions further encouraged companies to introduce more skilled tasks and systematic training together with new machinery. The emaciation of the labor movement over the last several decades has been a double whammy for shared prosperity. Wage growth slowed down partly because US labor unions became weaker and could not negotiate the same terms for their workers. Even more importantly, without strong unions, worker voice on the direction of technology disappeared." (Page 266)

"Two other changes amplified the decline of labor and inequality. First, without countervailing powers from the labor movement, corporations and their managers developed a very different vision. Cutting labor costs became a priority, and sharing productivity gains with workers came to be viewed as akin to a failure of management. In addition to taking a harder line in wage negotiations, corporations shifted production toward nonunionized plants in the United States and increasingly abroad. Many firms introduced incentive pay, which rewarded managers and high performers, but at the expense of lower-skill workers. Outsourcing became fashionable as another cost-cutting strategy" (Page 266)

"Second, it was not only companies choosing more automation from a given menu of technologies. With the new direction of the digital industry, the menu itself shifted powerfully toward greater automation and away from worker-friendly technologies. With a whole slew of digital tools enabling new ways of substituting machines and algorithms for labor, and little countervailing powers to oppose this move, many corporations embraced automation enthusiastically and turned their back on creating new tasks and opportunities for workers, especially those without a college degree. Consequently, although productivity (output per worker) continued to increase in the US economy, worker marginal productivity (how much that an additional hour of labor boosts production) did not keep up." (Page 267)

"It bears repeating that shared prosperity was not destroyed by automation per se, but by an unbalanced technology portfolio prioritizing automation and ignoring the creation of new tasks for workers." (Page 267)

"The automotive industry is indicative of these trends. US car companies were some of the most dynamic employers in the country in the first eight decades of the twentieth century, and as we saw in Chapter 7, they were at the forefront of not just automation but also the introduction of new tasks and jobs for workers. Blue-collar work in the automotive industry was plentiful and well paid. Workers without college degrees and sometimes even without high school diplomas were hired and trained to operate new, sophisticated machinery, and they received quite attractive wages. The nature and availability of work in the automobile industry changed fundamentally in recent decades, however. Many of the production tasks in the body shop, such as painting, welding, and precision work, as well as a range of assembly jobs, have been automated using robots and specialized software. The wages of blue-collar workers in the industry have not increased much since 1980. Achieving the American dream through the automotive industry is much harder today than in the 1950s or 1960s" (Page 268)

"One can see the implications of this change in technology and organization of production in the hiring strategies of the industry. Since the 1980s, the US automotive giants stopped hiring and training low-education workers for complex production tasks and started accepting just higher-skilled applicants with formal qualifications, and only after a battery of aptitude and personality tests and interviews. This new human-resource strategy was enabled by the fact that there were many more applicants than available jobs and many of them had postsecondary education" (Page 268)

"Although the abatement of rent sharing and the automation focus of new technologies have been the most important drivers of inequality and the decline of the labor share, other factors have also played a role. Offshoring has contributed to worsening conditions for labor: numerous jobs in car manufacturing and electronics have been shifted to lower-wage economies, such as China or Mexico. Even more important has been rising merchandise imports from China that have adversely affected many US manufacturing industries and the communities in which they were concentrated. The total number of jobs lost to Chinese competition between 1990 and 2007, just before the Great Recession, may be as high as three million. However, the effects of automation technologies and the eclipse of rent sharing on inequality have been even more extensive than the consequences of this “China shock.”" (Page 269)

"The fallout from these regional effects has gone beyond economics and gives us a microcosm of the problems that the US economy has been facing more broadly. As manufacturing jobs disappeared, social problems multiplied. Marriage rates fell, out-ofwedlock childbirth increased, and mental health problems rose in the worst-affected communities. More broadly, job losses and worsening economic opportunities, especially for Americans without a college degree, appear to have been a major driver of the rise in what economists Anne Case and Angus Deaton call “deaths of despair”premature deaths caused by drugs, alcohol, and suicide. Partly as a result of these deaths, US life expectancy at birth has declined for several years in a row, which is unparalleled in the recent history of Western nations." (Page 270)

"In fact, globalization and automation have been synergistic, both driven by the same urge to cut labor costs and sideline workers. They have both been facilitated by the lack of countervailing powers in workplaces and in the political process since 1980" (Page 271)

"How did businesses manage to become so powerful vis-à-vis labor and to cripple rent sharing? And why did technology turn antilabor? The answer to the first question, as we will see below, is related to a series of institutional transformations in the United States and other Western nations. The answer to the second also builds on these institutional changes but crucially involves the emergence of a new utopian (but in reality, largely dystopian) digital vision, which pushed technologies and practices in an increasingly antilabor direction" (Page 271)

"We saw in Chapter 7 how a sort of balance between business and organized labor emerged in the United States after the 1930s. It was undergirded by robust wage growth across jobs ranging from the unskilled to the highly skilled, and by a broadly worker-friendly direction of technology. In consequence, the political and economic landscape of the United States looked very different by the 1970s than in the early decades of the twentieth century. Gone was the overwhelming political and economic clout of mega-businesses, such as the Carnegie Steel Company and John D. Rockefeller’s Standard Oil." (Page 272)

"Several iconic government regulations resulted from consumer activism. The National Traffic and Motor Vehicle Safety Act of 1966, which set the first safety standards for automobiles, was a direct response to the issues that Nader publicized. The Environmental Protection Agency was launched in 1970, with an explicit remit to prevent pollution and environmental damage by businesses." (Page 272)

"The Occupational Safety and Health Administration (OSHA) came into existence in December of the same year to protect the health and well-being of workers. Although some of these problems were previously monitored by the Bureau of Labor Standards, OSHA gained much greater authority over businesses" (Page 272)

"The Food and Drug Administration (FDA), which had been around since the beginning of the century, significantly increased its powers because of the Kefauver-Harris amendment of 1962 and the US Public Health Service reorganizations of 1966‒1973. The impetus for these changes came from a number of highly publicized scandals in Europe and the United States, convincing lawmakers that the agency needed to be more independent and approve only drugs that were safe and effective. The year 1974 also witnessed the beginning of the Department of Justice’s action to break up AT&T, which had dominated the telephone sector in the US. These changes reflected a new, more muscular regulatory approach. Many were implemented under a Republican president, Richard Nixon. Nixon’s embrace of regulation was not a sharp break with the postwar Republican establishment. Dwight Eisenhower had already moved in the same direction, defining himself as a “modern Republican,” meaning that he was going to maintain most of what was left of the New Deal" (Page 273)

"The 1960s witnessed the success of the civil rights movement and greater mobilization among left-wing Americans supporting civil rights and further political reforms. Lyndon Johnson initiated the Great Society program and the War on Poverty, adapting some key tenets of a European-style social safety net to the US context." (Page 273)

"Constraints on business conduct often benefited workers and consumers but were resented by business owners and executives." (Page 273)

"After the war, many businesspeople continued to be animated by a belief that the country was being lost to the “liberals.” In his 1965 book, The Liberal Establishment: Who Runs America and How, M. Stanton Evans wrote that “the chief point about the Liberal Establishment is that it is in control.” Early pro-business, right-wing organizations and think tanks received funding from executives and wealthy Americans philosophically opposed to the New Deal. As is often the case, philosophy was mixed with material interests. Tax-exempt philanthropic and charitable donations by large US corporations have tended to support causes aligned with their strategic interests (for example, energy companies philanthropically funding anti-climatescience think tanks)." (Page 274)

"The pernicious role of money in US politics has been much discussed. But the story is more nuanced than what is sometimes presumed. Corruption at the federal level is not unknown, and political stances sometimes change because of campaign contributions from wealthy donors. Most of the time, however, politicians and their staff need to be persuaded that a particular approach to public policy serves either the public interest or their constituency. Copious amounts of money alone cannot achieve this unless an alternative vision of how the market economy should be organized becomes accepted. During the 1950s and 1960s, elements of such a vision started to come together" (Page 274)

"In 1953 President Dwight Eisenhower nominated Charles Wilson, then the president of General Motors, as secretary of defense. During his confirmation hearing, Wilson had to defend his controversial decision to hold on to substantial shares of GM, and he coined the aphorism “What was good for our country was good for General Motors, and vice versa.” Wilson was arguing that he could not imagine a situation in which he would have to do something good for the country that would not be good for GM. But people misconstrue him as claiming that what was good for GM was good for the country, for understandable reasons. By the 1980s, the view that what was good for business, or even large corporations, was good for the country had become commonplace. This was an about-face from the prevailing attitudes of the 1930s, and the idea was now taking hold that shifting the rules to favor companies and to boost profits was the best possible way to help everyone. This intellectual reversal was rooted in a lot of hard work by political entrepreneurs and organizations. An intellectual leader in this endeavor was the conservative magazine National Review, founded by William F. Buckley Jr. in 1955. Buckley intended his publication to counter the trends from the Left because “in its maturity, literate America rejected conservatism in favor of radical social experimentation.” He continued: “Since ideas rule the world, the ideologues, having won over the intellectual class, simply walked in and started to run things." (Page 275)

"The idea that unregulated markets work in the interest of the nation and the common good became the basis for a new approach to public policy. Missing from this emerging consensus was a clear set of recommendations for business leaders—how should they behave, and what would justify their actions? The answers came from two economists at the University of Chicago, George Stigler and Milton Friedman. Stigler’s and Friedman’s views about economics and politics overlapped with Hayek’s, but in some ways went further. Both Stigler and Friedman were more opposed to regulations than Hayek was" (Page 278)

"Friedman articulated an idea that was already in the air. The previous decades had witnessed stinging criticisms of government regulations and more voices in favor of the market mechanism. Nevertheless, the impact of the Friedman doctrine is hard to exaggerate. At one fell swoop, it crystallized a new vision in which big businesses that made money were heroes, not the villains that Ralph Nader and his allies painted them as. It also gave business executives a clear mandate: raise profits." (Page 279)

"Another economist, Michael Jensen, argued that managers of publicly listed corporations were not sufficiently committed to their shareholders and were instead pursuing projects that glorified themselves or built wasteful empires. Jensen maintained that these managers needed to be controlled more tightly, but because that was difficult, the more natural path was to have their compensation tied to the value they created for shareholders. This meant giving managers big bonuses and stock options in order to focus them on boosting the company’s stock price" (Page 279)

"The Houston-based company was selected as “America’s Most Innovative Company” six years in a row by Fortune magazine. But in 2001 it was revealed that Enron’s financial success was in large part a result of systematic misreporting and fraud, which boosted the company’s stock market performance (and made hundreds of millions of dollars for its executives). Although Enron was the culprit that is most keenly remembered today, many other corporations and executives were involved in similar shenanigans, and several more scandals were revealed in the early 2000s." (Page 280)

"Second, the doctrine altered the balance between managers and workers. Sharing of productivity gains between companies and workers was a key pillar of broad-based prosperity after 1945. It was bolstered by labor’s collective bargaining power to make corporations pay high wages, by social norms of sharing the benefits of growth, and even by ideas of “welfare capitalism,” as we saw in Chapter 7. The Friedman doctrine pushed in a different direction: good CEOs did not have to pay high wages. Their social responsibility was solely to the shareholders. Many high-profile CEOs, such as General Electric’s Jack Welch, heeded the advice and took a tough stance against wage raises." (Page 280)

"Recent research shows that managers who attended business schools started implementing the Friedman doctrine, especially when it came to wage setting. They stopped wage growth in their firms," (Page 280)

"compared to similar companies run by managers who did not attend business schools. Managers in the United States and Denmark without an MBA share with their workers about 20 percent of any increase in value added. For managers inculcated in business schools, this number is zero. Somewhat disappointingly for business schools and for economists from the Friedman-Jensen school, there is no evidence that business school‒trained managers increase productivity, sales, exports, or investment. But they do increase shareholder value because they cut wages. They also pay themselves more handsomely than other managers." (Page 281)

"Thwarting the workings of the market is not the only reason for being suspicious of big businesses. A well-known proposition in economics is the Arrow replacement effect, named after the Nobel Prize–winning economist Kenneth Arrow and later popularized by the business scholar Clayton Christensen as the “innovator’s dilemma.” It states that large corporations are timid innovators because they are afraid of eroding their own profits from existing offerings. If a new product will eat into the revenues a corporation enjoys from what it is already doing, why go there? In contrast, a new entrant could be very keen on doing something quite different because it cares only about those new profits." (Page 282)

"Even more important is the impact of large corporations on political and social power. US Supreme Court justice Louis Brandeis nailed this when he stated, “We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.” He was opposed to large corporations not just because they increased market concentration and created conditions of monopoly, undercutting the market mechanism. He maintained that as they became very large, they exercised disproportionate political power, and the wealth they created for their owners further degraded the political process. Brandeis did not focus as much on social powerfor example, whose ideas and vision we listen to—but his reasoning extends to that domain as well. When a few companies and their executives achieve higher status and greater power, it becomes harder to counter their vision." (Page 283)

"The Manne Economics Institute for Federal Judges, founded in 1976 with corporate funding, instructed scores of judges in economics during intensive training camps, but the economics they taught was a very specific version based on Friedman’s, Stigler’s, and Bork’s ideas. Judges who attended these training sessions became influenced by their teaching and began using more of the language of economics in their opinions. Strikingly, they also started issuing more conservative decisions and ruling consistently against regulatory agencies and antitrust action. The Federalist Society, founded in 1982 with similarly generous support from antiregulation executives, had a similar aim—grooming pro-business, antiregulation law students, judges, and Supreme Court justices. It has been phenomenally successful; six of the current Supreme Court justices are among its alumni." (Page 284)

"The implications of the rapid growth of big businesses are wideranging. Many economists argue that they are now enjoying greater market power, which they are exercising both to thwart innovation from rivals and to enrich their top executives and shareholders. Gargantuan monopolies are often bad news for consumers because they distort prices and innovation. They also spell trouble for the productivity bandwagon because they reduce competition for workers. They powerfully multiply inequality at the top by enriching their already-wealthy shareholders. Large corporations have sometimes boosted the earnings of their employees by sharing their profits with them. But another part of the institutional changes of the last several decades meant that this was not likely to happen: the eclipse of worker power." (Page 285)

"Despite American unions’ important role in the shared prosperity of the decades that followed World War II, their relationship with management was always strained. When unions win elections for representation in a plant, we see a striking increase in the likelihood that the plant will close. This is partly because of multiplant corporations shifting their production to nonunionized establishments." (Page 285)

"are moved elsewhere. The conflict inherent in this relationship has both idiosyncratic and institutional roots. Some unions developed close ties with organized crime because of their presence in activities that were controlled by the Mafia. Leaders such as Jimmy Hoffa, president of the International Brotherhood of Teamsters, came to signify this dark side and likely contributed to the decline in public support for labor organizations. Hoffa served time in prison for bribery and various other crimes, and was probably murdered by the Mafia" (Page 286)

"More important than the flaws of the union leaders has been the way in which American unions were organized. We saw in Chapter 7 that collective agreements in Sweden and other Nordic countries were organized in the context of the corporatist model, which attempted to cultivate greater communication and cooperation between management and workers. They also set wages at the industry level. The German system combines industry-level wage bargaining together with work councils at the firm level, which represent the worker voice on corporate boards. In the United States, on the other hand, the 1947 Taft-Hartley Act weakened some of the pro-union provisions of the Wagner Act and legislated that collective bargaining had to take place at the business-unit level. It also banned secondary industrial action, such as boycotts in sympathy with strikers. Consequently, American unions organize and negotiate wages in their immediate workplaces, with no industry coordination. This arrangement breeds more conflictual relations between business and labor. When managers think that a hard line against unions can reduce wages and create a cost advantage relative to competitors, they are less likely to accept union demands" (Page 286)

"To be fair, Hammer and Champy emphasized that reengineering was not just automation, but they also took the view that more effective use of software would eliminate many unskilled tasks: “Much of the old, routine work is eliminated or automated. If the old model was simple tasks for simple people, the new one is complex jobs for smart people, which raises the bar for entry into the workforce. Few simple, routine, unskilled jobs are to be found in a reengineered environment.” In practice, the smart people for the complex jobs were almost always workers with college or postgraduate degrees. Well-paying jobs for noncollege workers became scant in reengineered environments." (Page 288)

"The high priests of the emerging vision came from the newly burgeoning management-consulting field. Management consulting barely existed in the 1950s, and its growth coincides with efforts to remake corporations through “better” use of digital technology. Together with business schools, leading management-consulting companies such as McKinsey and Arthur Andersen also pushed cost cutting. As these ideas were increasingly preached by articulate management experts, it became harder for workers to resist." (Page 289)

"Interviews from the 1980s with workers both on shop floors and in offices indicated their anxiety in the face of new digital technologies. As one worker put it, “We don’t know what will be happening to us in the future. Modern technology is taking over. What will be our place?”" (Page 290)

"Overall, whereas the average tax rate on labor income, based on payroll and federal income taxes, remained over 25 percent for the last thirty years, the effective tax rates on equipment and software capital (including all capital gains and income taxes) fell from around 15 percent to less than 5 percent in 2018. These tax incentives meant that businesses had even a greater appetite for automation equipment, and their demand fueled further development of automation technologies in a self-reinforcing cycle." (Page 295)

"Over the last five decades, both government strategic technology leadership and funding declined. Federal spending on research and development fell from around 2 percent of GDP in the mid-1960s to about 0.6 percent today. The government also became more likely to support the research priorities set by leading corporations. This new landscape then allowed large corporations, especially in the digital" (Page 295)

"area, to determine the direction of technology. Their incentives and mind-set pushed toward more and more automation." (Page 296)

"The direction of technology that prioritized automation cannot be understood unless we recognize the new digital vision that emerged in the 1980s. This vision combined the drive to cut labor costs, rooted in the Friedman doctrine, with elements of the hacker ethic, but abandoned the philosophy of early hackers such as Lee Felsenstein that was antielitist and suspicious of corporate power. Felsenstein admonished IBM and other big corporations because they were trying to misuse technology with their ideology of “design by geniuses for use by idiots.” The new vision instead embraced the top-down design of digital technologies aimed at eliminating people from the production process." (Page 296)

"The transformation from the hacker ethic to corporate digital utopia was largely about following the money and social power. By the 1980s, software engineers could either have their ideals or gain tremendous riches by signing up with companies that were becoming larger and more powerful. Many chose the latter." (Page 297)

"It was also generally accepted that those few seen as contributing to the public good by launching new businesses should be handsomely rewarded. As the Silicon Valley entrepreneur Paul Graham, one of Businessweek’s “twenty-five most influential people on the web,” put it, “I’ve become an expert on how to increase economic inequality, and I’ve spent the past decade working hard to do it.... You can’t prevent great variations in wealth without preventing people from getting rich, and you can’t do that without preventing them from starting startups" (Page 297)

"Generations that lived in the 1960s and 1970s used the same (rotary dial) telephone and the same TV set for decades, until they broke down and buying new equipment became inevitable. Today, most middle-class families upgrade their mobile phones, TVs, or other electronics every year or two: new models are faster, glossier, and more capable because of their myriad new features. For example, Apple releases a new iPhone almost every year." (Page 298)

"So why are tech companies not developing tools that help humans and at the same time boost productivity? There are several reasons for this, all of them informative about the broader forces we are confronted with. Consider the teaching example, and recall that new tasks, as in this example, are useful in part because they increase productivity by generating meaningful and high-paying jobs for humans—in this instance, for teachers. Yet new teaching tasks imply greater costs for schools already strapped for cash. Most public schools, like other modern organizations, have to focus on containing labor costs and may struggle to hire additional teachers. Consequently, new algorithms for automated grading or automated teaching could appear more attractive to them." (Page 339)

"This observation reiterates a key point: human-complementary machines are not attractive to organizations when they are intent on cost cutting" (Page 340)

"We saw in Chapter 9 that digital technologies, which are almost by their nature highly general purpose, could have been used to further machine usefulness—for example, by creating new worker tasks or new platforms that multiplied human capabilities. It was the vision and the business model of large tech companies that pushed toward a primary focus on worker monitoring and job destruction through automation. The same is true when it comes to the use of AI as a tool in the hands of authoritarian governments and some purportedly democratic ones" (Page 361)

"Mark Zuckerberg saw from the very beginning that key to Facebook’s success would be its ability to be a vehicle, or in fact even a manufacturer, of a “social web,” in which people would engage in a range of social activities. To accomplish this, he prioritized the growth of the platform above all else." (Page 376)

"The first important innovation in this effort was the “Like” button, which not only revealed much more about user preferences but also would act as an emotional cue to encourage greater engagement. Several other architectural changes—for example, concerning how the newsfeed works and how users can give feedback—were also introduced. Most importantly, AI algorithms started organizing each user’s newsfeed to attract and retain their attention and, of course, place ads in the most profitable manner" (Page 377)

"An ambitious research project is revealing about this issue. Researchers incentivized some people on Facebook to (temporarily) give up using the platform and then compared their time use and emotional states to members of a control group who were given no such inducement and continued to use Facebook intensively. Those who were encouraged to stop using Facebook spent more time doing other social activities and were significantly happier. But, reflecting the social pressure that they might have felt from peers and from the platform trying to reengage them, when the study was over, they went back to Facebook—worse mental state and all." (Page 378)

"When Facebook had decided to change its algorithm so that it would not promote misleading stories and untrustworthy websites after the 2020 US presidential election, the results were striking. Hateful content and misinformation stopped going viral. But a short while later, the changes were reversed, and the platform was back to business as usual, largely because when the company tested the effect of the change on engagement, it found that when people were getting less enraged and triggered, they were spending less time there." (Page 379)

"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." (Page 383)

"What Father Coughlin effectively exploited in the United States was perfected in Germany at the same time. The Nazis, once in power, heavily relied on radio propaganda. Hitler’s propaganda minister, Joseph Goebbels, became an expert at using the airways to whip up support for Nazi policies and hatred against Jewish people and “Bolsheviks.” Goebbels himself said that “our way of taking power and using it would have been inconceivable without the radio and the airplane." (Page 384)

"Coughlin’s pernicious effects were neutralized when FDR’s administration decided that the First Amendment protected free speech but not the right to broadcast. It argued that radio spectrum was a publicly owned commons that must be regulated. With new regulations requiring broadcasting permits, Father Coughlin’s programs were forced off the air. Coughlin continued to write and soon started broadcasting again, though with more limited access and only through individual stations. His antiwar, pro-German propaganda was further curtailed after the outbreak of World War II." (Page 385)

"AI technologies did not have to focus on automating work and monitoring employees in workplaces. Nor did they have to be developed to empower government censorship. There is also nothing inherently antidemocratic in digital technologies, and social media certainly does not have to focus on maximizing outrage, extremism, and indignation. It was a matter of choice—choice by tech companies, AI researchers, and governments—that got us into our current predicament." (Page 385)

"But the best demonstration of the viability of alternative models comes from Wikipedia. The platform is one of the most visited services on the web, having received more than 5.5 billion unique annual visitors over the last few years. Wikipedia does not try to monopolize user attention because it does not finance itself by advertisements." (Page 387)

"This administrative structure is instrumental in the site’s ability to prevent the propagation of misinformation and the type of polarization that has been all too common on other sites. Wikipedia’s experience suggests that the wisdom of the crowd, so dearly admired by early techno-optimists of social media, can work, but only when underpinned and monitored by the right organizational structure and when appropriate choices are made on the use and direction of technology." (Page 387)

"You can pin your hopes on the productivity bandwagon if you like. But there is no indication that shared productivity gains will be forthcoming soon. As we have seen, managers and entrepreneurs often have a bias to use new technologies to automate work and disempower people, unless reined in by countervailing powers. Massive data collection has exacerbated this bias. Countervailing powers are hard to come by without democracy, however. When an elite completely controls politics and can use tools of repression and propaganda effectively, it is hard to build any meaningful, well-organized opposition. So robust dissent will not rise in China anytime soon, especially under the increasingly effective system of censorship and AI-based surveillance that the Communist Party has established. But it is also becoming increasingly difficult to hope for the resurgence of countervailing powers in the United States and much of the rest of the Western world. AI is choking democracy while also providing the tools for repression and manipulation to both authoritarian and democratically elected governments" (Page 389)

"There are two things that are important in politics. The first is money and I can’t remember what the second one is.”" (Page 393)

"The United States today would be a very different place if the economic and social conditions of the Gilded Age had endured. But a broad Progressive movement formed to oppose the trusts’ power and demand institutional change. Although the movement had its roots in earlier rural organizations, such as the National Grange of the Order of Patrons of Husbandry and later the Populist Party, Progressives built a much broader coalition around urban middle classes and had a momentous impact on the history of the United States." (Page 393)

"THE PROGRESSIVE MOVEMENT provides a historical perspective on the three prongs of a critical formula necessary for escaping our current predicament. The first is altering the narrative and changing norms. The Progressives enabled individual Americans to have an informed view about troubles in the economy and society—rather than just accepting the line coming from lawmakers, business tycoons, and the yellow journalists allied with them. For example, Tarbell never presented herself as a political candidate or even committed to one cause. Instead, she honed her craft of investigative journalism to expose the main facts about Standard Oil and its boss, Rockefeller. Critically, Progressives transformed what was viewed as acceptable for companies to do and what ordinary citizens thought they could do about injustices. The second is cultivating countervailing powers. Building on the change in the narrative and social norms, Progressives helped organize people into a broad movement that could oppose robber barons and push politicians to reform, including via labor unions. The third prong is policy solutions, which Progressives articulated based on the new narrative, research, and expertise." (Page 396)

"Our current problems are rooted in the enormous economic, political, and social power of corporations, especially in the tech industry. The concentrated power of business undercuts shared prosperity because it limits the sharing of gains from technological change. But its most pernicious impact is via the direction of technology, which is moving excessively toward automation, surveillance, data collection, and advertising. To regain shared prosperity, we must redirect technology, and this means activating a version of the same approach that worked more than a century ago for the Progressives." (Page 401)

"This can start only by altering the narrative and the norms. The necessary steps are truly fundamental. Society and its powerful gatekeepers need to stop being mesmerized by tech billionaires and their agenda. Debates on new technology ought to center not just on the brilliance of new products and algorithms but also on whether they are working for the people or against the people. Whether digital technologies should be used for automating work and empowering large companies and nondemocratic governments must not be the sole decision of a handful of entrepreneurs and engineers. One does not need to be an AI expert to have a say about the direction of progress and the future of our society forged by these technologies. One does not need to be a tech investor or venture capitalist to hold tech entrepreneurs and engineers accountable for what their inventions do." (Page 401)

"We cannot redirect technology without building new countervailing powers. And we cannot build countervailing powers without relying on civil-society organizations that bring people together around shared issues and cultivate norms of self-governance and political action." (Page 404)

"Worker Organization. Labor unions have been a mainstay of countervailing powers since the beginning of the industrial age. They are a key vehicle for supporting the sharing of productivity gains between employers and workers. In workplaces where labor has a voice (either in the form of unions or work councils, as in many German companies), workers are consulted in technology and organizational decisions, and they have at times been successful in acting as a counterweight to excessive automation. In their heyday, labor unions succeeded because they formed bonds among their members. They provided camaraderie for people working together and on similar tasks. They were a nexus of cooperation along common economic interests, centered on better working conditions and higher wages. And they cultivated political objectives aligned with their membership’s beliefs and interests, such as the right to vote. These ingredients are unlikely to work as synergistically today" (Page 404)

"However, collective action requires a large group of people acting together to achieve an objective—for example, pushing companies toward reducing their carbon footprint. Such action is costly for most people, who will have to spend time to become informed, to attend meetings, to change their consumption habits, and to occasionally go out and protest. These costs multiply when there is a counterpush from companies and sometimes, even worse, from state security services. In authoritarian and even semi-democratic regimes, authorities can clamp down on protests and civil-society organizations. These dynamics produce the “free-rider” problem: people who share the same values may nevertheless be tempted not to take part in collective action in order to avoid paying the costs. This tendency of course intensifies when punishments against dissidents increase. For example, recent research on Hong Kong protests shows that when pro-democracy university students expect others to take part in rallies against antidemocratic measures, they themselves become less likely to join the protests, free riding on others’ efforts. Free riding is at the root of the collective-action dilemma: without coordination, only a minority of people who desire social change take part in collective action." (Page 406)

"Specifically, what this means is that when a company hires more workers and pays them $100,000 per year, it and the workers will jointly owe $25,000 in payroll taxes. When it instead buys new equipment costing $100,000 to perform the same tasks, it pays less than $5,000 in taxes. This asymmetry is an impetus to additional automation and is present in similar forms, even if sometimes less pronounced, in the tax codes of several other Western economies" (Page 415)

"The US needs a better social safety net and better and more redistribution. Much evidence shows that social safety nets have gotten much weaker in the United States and Britain, and this deficiency contributes to poverty and reduced social mobility. Social mobility today is much lower in the US than in Western European countries." (Page 423)

"The more fundamental problem with UBI is not related to psychological benefits of work but to the misguided narrative about the problems facing the world it propagates. UBI naturally lends itself to interpretations of our current predicament that are wrong and counterproductive. It implies that we are inexorably heading toward a world of little work for most people and growing inequality between the designers of more and more-advanced digital technologies and the rest, so major redistribution is the only thing we can do. In this way, it is also sometimes justified as the only way of quelling growing discontent in the population. As we have emphasized, this perspective is wrong. We are heading toward greater inequality not inevitably but because of faulty choices about who has power in society and the direction of technology. These are the fundamental issues to be addressed, whereas UBI is defeatist and accepts this fate." (Page 425)

"Finally, we warn against the view that technology should adjust in its own way and the only thing society can do to counter its adverse effects is to educate more of the workforce. The direction of technology, its inequality implications, and the extent to which productivity gains are shared between capital and labor are not inescapable givens; they are societal choices." (Page 426)

"Nevertheless, minimum-wage hikes are not a systemic solution to our problems. First, minimum wages have their biggest impact on the lowest-paid workers, whereas reducing overall inequality necessitates sharing productivity gains more equitably throughout the population. Second, minimum wages can have only a small role in countering the excessive power of big business and labor markets." (Page 427)

"This motivates our perspective that the minimum wage is most useful as part of a broader package aimed at redirecting technology away from automation. If technology can become more worker friendly, businesses would be less tempted to automate work as soon as they face higher wages. In such a scenario, when faced by higher wages, employers may also choose to invest in worker productivity—for example, with training or technological adjustments. This reiterates our overall conclusion that redirecting technological change and making corporations view workers as an important resource is critical. If this can be achieved, minimum wages can be more effective and less likely to backfire." (Page 428)

"The most popular textbook for undergraduates today, Gregory Mankiw’s Principles of Economics, states that “almost all variation in living standards is attributable to differences in countries’ productivity—that is, the amount of goods and services produced by each unit of labor input” (Mankiw 2018, 13, italics in original). Mankiw then links productivity to technological change and gives a succinct statement of the productivity bandwagon. In a section called “Why Productivity Is Important,” he explains that living standards are determined by productivity, which depends on technology, and writes that “Americans live better than Nigerians because American workers are more productive than Nigerian workers” (518‒519). He also declares this observation to be one of the ten most important principles of economics. Mankiw recognizes the possibility of job losses but frames the issue this way: “It is also possible for technological change to reduce labor demand. The invention of a cheap industrial robot, for instance, could conceivably reduce the marginal product of labor, shifting the labor-demand curve to the left. Economists call this labor-saving technological change. History suggests, however, that most technological progress is instead labor-augmenting” (Mankiw 2018, 367, italics in original)." (Page 466)

"These results are a consequence of the type of model that most economists focus on, which assumes that technological changes directly raise the productivity of either capital or labor or both—in other words, in the terminology of economics, technological change is either “labor-augmenting” or “capital-augmenting” (see Barro and Sala-i-Martin 2004 and Acemoglu 2009 for an overview of standard growth models and the forms of technological change). With these types of technological change and under the assumption that there are “constant returns to scale” (so that doubling capital and labor doubles output), there is indeed a tight relationship between productivity and wages of all types of labor." (Page 467)

"The fundamental problem is that automation, which we argue to have been critical during many stages of modern industrialization, does not correspond to an increase in the productivity of capital or labor. Rather, it involves the substitution of machines (or algorithms) for tasks previously performed by labor. Advances in automation technology can increase average productivity and at the same time reduce average real wages. Furthermore, technology’s inequality implications can be much more amplified when automation encroaches on the tasks performed by low-skill workers, reducing their real wages while raising the returns to capital and the wages of higher-skilled labor (Acemoglu and Restrepo 2022)." (Page 467)