I’m a sucker for any book about the Industrial Revolution, having grown up in its heartland in Lancashire cotton country, and have just read two. One was a re-read, of Joel Mokyr’s classic The Lever of Riches, as I wanted to refer to some aspects as I draft my new book. In particular, the many examples of time saving – for instance, “Although the paper industry is not often thought of as a typical industry of the Industrial Revolution, the Fourdrinier machine was in fact a revolutionary device. It reduced the time involved in making a given piece of paper from three weeks to three minutes.” The book focuses on the relationship between technological progress and economic growth to explore the perennial questions: why Britain? Why then?
The other is Maxine Berg and Pat Hudson’s new book Slavery, Capitalism and The Industrial Revolution. It’s a synthesis of a lot of recent research on Britain’s role in the slave trade and the economies of the Caribbean, and the interaction between slavery and empire and the way the Industrial Revolution in Britain took shape. I’ve read enough about the Industrial Revolution that I’d come across quite a lot of the material before – such as the links between compensation paid to slave-owners after abolition and the growth of financial services and funding of investment and consumption in Britain. The Bank of England has a fascinating working paper on compensation payments, and the UCL project is magisterial. The authors repeat the claim that the debt the government issued to pay compensation wasn’t paid off until 2015 – understandably, as the Treasury tweeted to that effect – although it’s more accurate to say that low interest rates then enabled the redemption of some consols.
But in any case the book does a terrific job of presenting a synoptic view of the role of slavery in answering the Why Britain? Why then? questions. History is over-determined, in retrospect. Searching for ‘a’ cause is doomed to fail. This book does not make that claim, acknowledging other explanations in the mix. It offers, though, an important perspective on an aspect of the Industrial Revolution that has only relatively recently come into focus.
I’ve carved out as many empty days as possible this summer to make significant headway with my next book, and as well as writing I’ve been re-reading some golden oldies. One is Theodore Porter’s classic Trust In Numbers: The Pursuit of Objectivity in Science and Public Life. For those who haven’t read it, it’s a historical exploration of the pursuit of quantification in economic domains (accounting, cost benefit analysis) as an expression of objectivity. A core argument is that the assertion of quantified objectivity is a signal of a group’s lack of power rather than the opposite; powerful groups or people expect to have their judgment trusted.
This is counter-intuitive if one has read so often that the deployment of numbers is the way social and political power is exerted by economists and others. But the case Porter makes is persuasive, certainly as far as the historical origins of quantification go. He also acknowledges that objectivity has become a desired characteristics of societies governed by the rule of law: “A decision made by the numbers … has at least the appearance of being fair and impersonal. Scientific objectivity thus provides an answer to a moral demand. … Quantification is a way of making decisions without seeming to decide.” But he adds: “Objectivity lends authority to officials who have very little of their own.” So numbers have the dual purpose of signalling impartiality and thereby giving authority to the number-producers: “The reputation of accounts and statistics for grayness helps to maintain their authority.”
My book will be anything but gray. It is looking at how economic statistics are constructed and how inadequate they have become as metrics of social progress (or its absence) given the technology-driven changes in the structure of the economy as well as the imperatives of making the environment count. These changes have been under way at least since my first book The Weightless World was published 26 years ago, but the social process of constructing the statistics is a slow one, carried out within the expert community of national statisticians. Thinking about how to replace what we have now – given the issues I highlighted in GDP – involves some deeply conceptual and philosophical questions.
I enjoyed a little book of essays by Amartya Sen, The Country of First Boys. This is a collection of reprints from articles in The Little Magazine in the early 2010s. Collections of this kind tend to be slightly repetitive because columnists have certain preoccupations they circle back to (certainly including me!). In this case, it is democracy and freedom, the importance of free speech in enabling public reasoning, identity, gender inequalities, and of course development, education and poverty. On the other hand, it is a highly accessible and enjoyable summary of some of Sen’s work.
Some points leapt out at me (reflecting my own current preoccupations). One was the example of Kerala, which has become one of the highest per capita income states in India, having been one of the poorest. Universal and good education and healthcare were a key part of its development. “Central to this understanding is the critical importance of social infrastructre in facilitating economic growth,” Sen writes (pxlix). “The role of infrastructure – physical and social – in economic performance has been a neglected subject in policymaking.” Another point was the role of ‘countervailing powers’ in ownership – a multiplicity of private owners (aka competition) but also other models – co-operatives, public ownership, independent bodies. Diversity of organisation rather than just diversity of views. This in the context of media, but – having been business model agnostic – I now think it makes for healthier competition in any market to get away from monocultures.
Anyway, a nice book for summer evenings reading in the late sunshine.
I’ve been reading Mordecai Kurz’s The Market Power of Technology: Understanding the Second Gilded Age, in between more summer-holiday type books (half way through Paul Murray’s excellent The Bee Sting now). Kurz’s underlying argument is one I find plausible: Technical innovation by corporations (on a platform of publicly-funded basic scientific research) drivers growth, but corporations translate innovation into monopoly power and rents. Policy alternates between lax and tough competition enforcement, the latter limiting the period of monopoly power. In between, there have been gilded ages.
The book distinguishes the return to capital productively employed from wealth, the accumulation of those rents. It argues that “all intangible assets are just different forms of monopoly wealth” – clearest for IP assets that explicitly guarantee firms’ monoplies. The book argues for prevention of tech mergers, break-up of vertically integrated parts of big corporations, and limitations on the granting of patents and copyright. Tech-based market power cannot be avoided but it should be contained.
The book combines economic and business history with an extended formal model of Kurz’s approach (and this means it is probably not a book for the general reader). The formal modelling is actually the part I found least compelling – particularly in Chapter 5, which for example assumes the monopoly producer has a constant returns to scale production function. This chapter estimates that monopoly power led to delays of 12-15 years in the diffusion of electricity in the US, but – unless I missed a key step – the calculation seems not to take account of the impact of scale effects, which would shorten those estimates.
The previous chapter has an intriguing chart (4.9): the 50s-late 70s are reported as a period of high monopoly profits – like the 20s and the 2000s on – yet were obviously a period of strong productivity growth and rising living standards. Kurz explains these decades as not being designated a gilded age because policy ensured rising real wages and high employment. But actually if monopoly wealth brings about rapid growth through self-reinforcing technological innovation, it would be nice to have more of that. The policy lesson seems to be more about redistribution and labour market policies than about competition enforcement to limit the monopoly rents. The periods of low welath and low market power in this historical chart were periods of weak growth or worse.
I’d also like to have had more about countries other than the US, and indeed some other examples – is Walmart a tech monopoly? Or Nike? Few other countries span as much of the technology frontier as the US, so diffusion becomes the more important issue, and market power protected by IP and other tactics can be deployed anywhere. But wealth inequality is high in many countries – are all characterised by companies garnering monopoly rents and if so how?
Still, the book does set in a coherent theoretical framework the many recent books that have addressed the issue of market concentration and particularly big tech. It’s an interesting framing of current growth challenges, and one I broadly agree with. And Kurz’s call for tougher competition policy echoes many others. We will see whether it will translate into tougher enforcement and an ened to this second gilded age.