Erik Brynjolfsson and Andrew McAfee, faculty members at the MIT Sloan School of Management, have a fascinating interview in this months Harvard Business Review where they admit the upbeat message of their last book, The Second Machine Age, largely ignored the downside of stagnation of the incomes of working families. And they think that technology itself may be a prime driver of that stagnation and rising economic inequality.
Krugman in arguing that technology has been largely a nonevent may be treating the role of technology too benignly, which is where Brynjolfsson and McAfee, for all their residual technological boosterism, may have more insight in seeing the tech as playing a more active role by inherently driving inequality. They focus on the winner-take-all market effects of new technology and that seems to be part of the problem. But as I argued in This Time is Different: How Big Data Has Left the Middle Class Behind, what distinguishes new technology is its focus less on automation, however important, than on expanding information controlled by corporate managers. Information does not in fact want to be free, since then it’s merely knowledge. Information almost by definition is a zero-sum game of advantage for those who have it versus those who don’t. Consumers and workers lose out as they increasingly bargain with companies that know more about what they want and the price they are willing to pay or the wage they are willing to settle for. The problem is not that consumers were hoping for flying cars and had to settle for a search engine. Instead, the problem is that Google’s search engine, like so much new information tech, is not in fact designed to benefit consumers but instead is designed to extract information to serve corporate marketing strategies.
Henry Ford was a Nazi sympathizer and a brutal employer but he and his engineers designed his cars to serve regular families. Today, the best minds of the world are overwhelmingly focused on producing digital services whose paying customer base are other businesses. The toxic financial engineering of capital markets that drove the financial crisis was just one example of this problem, but when technology is so overwhelmingly focused on the needs of the elite, it’s hardly a shock to find that the elite ends up being the main group financially benefiting from its deployment.