TECHNOLOGY AT WORK

February 2015
Citi GPS: Global Perspectives & Solutions
15
How the benefits of innovation are
distributed is key to whether the innovation
will be socially accepted
2. Technology at Work
The concern over technology rendering the skills of the workforce redundant
is hardly a recent one. To be sure, the type of creative destruction Joseph
Schumpeter famously argued was at the heart of long-run growth and
prosperity has increased the living standards of many over more than two
centuries. Nevertheless, technological progress has also created undesired
disruptions. Historically, it was not so much the lack of innovation and
entrepreneurial spirit that had hindered progress, but rather powerful
interests promoting the technological status quo. The great Roman writer,
Pliny the Elder, nicely illustrates this with a story from the reign of the
Emperor Tiberius, where an inventor had discovered a way of manufacturing
unbreakable glass. In anticipation of a reward he approached the emperor to
display his invention. Fearing the creative destruction that would follow the
diffusion of this technology, however, the Emperor had the man sentenced to
death. 23
This story is not an isolated example. Indeed, it is illustrative of a broader tendency
of how the ruling elite often blocked technological progress in the past. Under
Emperor Vespasian, who ruled Rome between AD 69 and 79, the inventor of a
machine for transporting columns to the Capitol was denied the use of his invention,
with the Emperor declaring: “How will it be possible to feed the populace?” 24 Even
as late as 1589, when William Lee invented the stocking frame knitting machine,
Queen Elizabeth I argued that: “Thou aimest high, Master Lee. Consider thou what
the invention could do to my poor subjects. It would assuredly bring to them ruin by
depriving them of employment, thus making them beggars.” 25
The combination of central government controlling progress and the lack of
incentives to promote creative destruction thus held innovation and
entrepreneurship back for a long time. In fact, to understand events like the
Industrial Revolution, we need to understand the political economy of technological
progress.
The Political Economy of Technological Change
The economic historian Joel Mokyr has persuasively argued that unless all people
in a society accept the verdict of the market, innovations are likely to be resisted
through political activism. In other words, the balance between job conservation and
creative destruction reflects the balance of power in society, and how the benefits
from innovation are being distributed.
The British Industrial Revolution provides a case in point for how new institutional
frameworks can lay the foundations for long-run growth and prosperity. As
Parliamentary supremacy was established over the Crown, following the Glorious
Revolution of 1688, the craft guilds in Britain lost most of their political power. 26 With
merchants and inventors gaining political influence, legislation was passed in 1769
making the destruction of machinery punishable by death. 27 The shifting sentiment
of the government towards the destruction of machinery was explained by a
resolution passed after the Lancashire riots of 1779, stating that: “The sole cause of
great riots was the new machines employed in cotton manufacture; the country
23 Acemoglu and Robinson (2012)
24 ibid
25 ibid
26 Nef (1957).
27 Mokyr (1990).
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