The radical promises of these visions led many to anticipate dramatic economic and productivity growth from information technology, as well as the waves of privatization, deregulation and tax cuts that went along with them in most liberal democracies beginning roughly half a century ago. Yet these promises are far from bearing fruit and economic analysis increasingly suggests these directions for technology may play a key role in explaining that failure.
Figure 2-0-F. Improvement in technology represented by growth in "Total Factor Productivity". Source: Gordon, The Rise and Fall of American Growth[^TFP]
[^TFP]: Robert J. Gordon, op. cit.
Instead of the promised explosion of economic possibility, the last half-century has seen a dramatic deceleration of economic and especially productivity growth. Figure F shows the growth in the United States of âTotal Factor Productivity (TFP)â, economistsâ most inclusive measure of the improvement in technology, averaged by decades from the beginning of the 20th century to today. Rates during the mid-century âGolden Ageâ roughly doubled their levels both before and after during the period we dub the âDigital Stagnationâ. The pattern is even more dramatic in other liberal democratic countries in Europe and in most of democratic Asia, with South Korea and Taiwan notable exceptions.
To make matters worse, this period of stagnation has also been one of dramatically rising inequality, especially in the United States. Figure G shows average income growth in the US by income percentile during the Golden Age and Digital Stagnation respectively. During the Golden Age, income growth was roughly constant across the distribution, but trailed off for top-income earners. During the Digital Stagnation, income growth was higher for higher earners and only exceeded the average level during the Golden Age for those in the top 1%, with even smaller groups earning the great majority of the overall much lower income gains.
Figure 2-0-G. Average income growth in the US by income percentile during the Golden Age and Digital Stagnation. Source: Saez and Zucman, "The Rise of Income and Wealth Inequality"[^inequality]
[^inequality]: Emmanuel Saez and Gabriel Zucman, "The Rise of Wealth and Inequality in America: Evidence from Distributional Macroeconomic Accounts," Journal of Economic Perspectives 34, no. 4 (2020): 3-26.
What has gone so wrong in the last half-century compared to the one before? Economists have studied a range of factors, from the rise of market power and the decline of unions to the progressively greater challenge of innovating when so much has already been invented. But increasing evidence focuses on two factors closely tied to the influence of technocracy and libertarianism respectively: the shift in the direction of technological progress towards automation and away from labor augmentation and the shift in the direction of policy away from proactively shaping industrial development and relations and towards an assumption that âfree markets know bestâ.
On the first point, in a series of recent papers, Acemoglu, Pascual Restrepo, and collaborators have documented the shift in the direction of technical progress from the Golden Age to the Digital Stagnation. Figure H summarizes their results, plotting cumulative changes in productivity over time from labor automation (what they call âdisplacementâ) and labor augmentation (what they call âreinstatementâ)[^AcemogluRestrepoStudy]. During the Golden Age, reinstatement roughly balanced displacement, leaving the share of income going to workers essentially constant. During the Digital Stagnation, however, displacement has slightly accelerated while reinstatement has dramatically fallen, leading to slower overall productivity growth and a significant reduction in the share of income going to workers. Furthermore, their analysis shows that the inegalitarian effects of this imbalance have been exacerbated by the concentration of displacement among low-skilled workers.
Figure 2-0-H. Cumulative changes in productivity over time from Displacement (labor automation) and Reinstatement (labor augmentation) during the Golden Age and Digital Stagnation. Source: Acemoglu and Restrepo, "Automation and New Tasks: How Technology Displaces and Reinstates Labor"^AcemogluRestrepo
The role of âneoliberalâ policies in contributing to the stagnation and inequality of this period is widely debated and we suspect most readers have formed their own views on the matter. One of us was also co-author of a book that contains a review of the evidence as of roughly a decade ago.[^PosnerWeylBook] We will thus not go into detail here and refer readers to instead to that or other related writing.[^PhilipponBook] However, clearly, the defining ideological and policy direction of this period was an embrace of capitalist market economics, often closely tied to claims that such an embrace was necessitated by the globalization of technology and the resulting impossibility of collective governance/action that is core to the Libertarian ideology. The, largely failed, last half-century of technology and policy has thus been characterized by the dominance of Technocracy in the sphere of technology and Libertarianism in the sphere of policy.
Of course, the last half century has hardly been devoid of technological breakthroughs that have genuinely brought about positive, if uneven and sometimes fraught, transformations. Personal computers empowered unprecedented human creativity in the 1980s; the internet allowed communication and connection across previously unimaginable distances in the 1990s; smartphones integrated these two revolutions and made them ubiquitous in the 2000s. Yet, it is striking that none of these most canonical innovations of our time fit neatly into the Technocratic or Libertarian stories. They were clearly all technologies that augmented human creativity, often called âintelligence augmentationâ or IA, rather than AI.[^IA] Yet neither were they envisioned primarily as tools to escape existing social institutions; they facilitated rich communication and connection rather than market transactions, private property, and secrecy. As we will see, these technologies emerged from a very different tradition than either of these two. Thus, even the few major technological leaps in this period were largely independent of or in contrast to these visions.
[^IA]: John Markoff, Machines of Loving Grace: The Quest for Common Ground Between Humans and Robots (New York: Ecco, 2015).
A fraying social contract
Yet the economic conditions surrounding the embrace of Technocracy and Libertarianism are only the easiest to quantify and thus most headline-grabbing. Deeper, more insidious, and ultimately more damaging have been the corrosion of the confidence, faith, and trust on which social support of both democracy and technology rest.
Faith in democratic institutions has been falling, especially in the last decade and a half in all democracies, but especially in the US and developing democracies. In the US, dissatisfaction with democracy has gone from being the opinion of a fringe (less than 25%) to being the majority opinion in the last 3 decades.[^CambridgeDemocracySurvey] While it is less consistently measured, faith in technology, especially leading technology companies, has been similarly declining. In the US, the technology sector has fallen from being considered the most trusted sector in the economy in the early and mid-2010s to amongst the least trusted, based on surveys by organizations like the Public Affairs Council, Morning Consult, Pew Research and Edelman Trust Barometer.[^EdelmanTrustBarometer]
These concerns have spilled out more broadly to a general loss of faith in a range of social institutions. The fraction of Americans expressing high confidence in several leading institutions (including organized religions, federal governments, public schools, media, and law enforcement) has fallen to roughly half its level when such surveys began, around the end of the Golden Age in most cases.[^GallupInstitutionConfidence] Trends in Europe are more moderate and the global picture is uneven, but the general trend towards declining institutional confidence in democratic countries is widely accepted.[^TrustInPublicInstitutions]
Reclaiming our future
Technology and democracy are trapped between two sides of a widening gulf. That war is damaging both sides of the conflict, undermining democracy and slowing technological development. As collateral damage, it is slowing economic growth, undermining confidence in social institutions, and fueling inequality. This conflict is not inevitable; it is the product of the technological directions liberal democracies have collectively chosen to invest in, once fueled by ideologies about the future that are antithetical to democratic ideals. Because political systems depend on technologies to thrive, democracy cannot thrive if we continue down this path.
Another path is possible. Technology and democracy can be each otherâs greatest allies. In fact, as we will argue, large-scale âDigital Democracyâ is a dream we have only begun to imagine, one that requires unprecedented technology to have any chance of being realized. By reimagining our future, shifting public investments, research agendas, and private development, we can build that future. In the rest of this book, we hope to show you how. And we will begin by telling you the story of a place that has gone farther than any other in realizing that future, a place where democracy and digital technology are not just allies, but deeply mutually entwined.
[^NarrowCorridor]: Daron Acemoglu, and James A Robinson, The Narrow Corridor: States, Societies, and the Fate of Liberty. (New York: Penguin Books, 2020). [^Tocqueville]: Such relationships differ from those established in markets, which are based on bilateral, transactional exchange in a âuniversalâ currency, as they denominate value in units based on local value and trust. [^OutInTheCountry]: Mary Gray, Out in the Country: Youth, Media, and Queer Visibility in Rural America (New York: NYU Press, 2009). See also OâDay, Emily B., and Richard G. Heimberg, âSocial Media Use, Social Anxiety, and Loneliness: A Systematic Review,â Computers in Human Behavior Reports 3, no. 100070 (January 2021), https://doi.org/10.1016/j.chbr.2021.100070; and see also Hunt Allcott, Luca Braghieri, Sarah Eichmeyer, and Matthew Gentzkow, âThe Welfare Effects of Social Media,â American Economic Review 110, no. 3 (March 1, 2020): 629â76. https://doi.org/10.1257/aer.20190658. [^GhostWork]: Siddharth Suri, and Mary L Gray, Ghost Work: How to Stop Silicon Valley from Building a New Global Underclass, (Boston: Houghton Mifflin Harcourt, 2019). David H. Autor, "Why Are There Still So Many Jobs? The History and Future of Workplace Automation", Journal of Economic Perspectives 29, no. 3 (2015): 3-30, https://www.aeaweb.org/articles?id=10.1257%2Fjep.29.3.3&source=post_page. [^PolarizationResearch]: Steven Levitsky, and Daniel Ziblatt. How Democracies Die, (New York: Broadway Books, 2018).; See also Yascha Mounk, The People vs. Democracy: Why Our Freedom Is in Danger and How to Save It, (Cambridge, Massachusetts: Harvard University Press, 2018); Cass Sunstein, #Republic: Divided Democracy in the Age of Social Media, (Princeton, New Jersey: Princeton University Press, 2017; Kathleen Jamieson, and Joseph Cappella, Echo Chamber: Rush Limbaugh and the Conservative Media Establishment, (Oxford, New York: Oxford University Press, 2008). Levi Boxell, Matthew Gentzkow and Jesse M. Shapiro, "Greater Internet Use is Not Associated with Faster Growth in Political Polarization among US Demographic Groups" Proceedings of the National Academy of Sciences 114, no. 40: 10612-10617. Levi Boxell, Matthew Gentzkow and Jesse M. Shapiro, "Cross-Country Trends in Affective Polarization" Review of Economics and Statistics Forthcoming. [^FinancialInnovation]: Alp Simsek, âThe Macroeconomics of Financial Speculation,â Annual Review of Economics 13, no. 1 (May 11, 2021), https://doi.org/10.1146/annurev-economics-092120-050543. [^CryptoChallenges]: Ben McKenzie, and Jacob Silverman, Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud, (New York: Abrams, 2023); "Financial Stability Board, âRegulation, Supervision and Oversight of Crypto-Asset Activities and Markets Consultative Document,â 2022, https://www.fsb.org/wp-content/uploads/P111022-3.pdf; Greg Lacurci, âCryptocurrency Poses a Significant Risk of Tax Evasion,â CNBC, May 31, 2021, https://www.cnbc.com/2021/05/31/cryptocurrency-poses-a-significant-risk-of-tax-evasion.html; Arianna Trozze, Josh Kamps, Eray Akartuna, Florian Hetzel, Bennett Kleinberg, Toby Davies, and Shane Johnson, âCryptocurrencies and Future Financial Crime,â Crime Science 11, no. 1 (January 5, 2022), https://doi.org/10.1186/s40163-021-00163-8; Baer, Katherine, Ruud De Mooij, Shafik Hebous, and Michael Keen, âCrypto Poses Significant Tax Problemsâand They Could Get Worse,â IMF, July 5, 2023, https://www.imf.org/en/Blogs/Articles/2023/07/05/crypto-poses-significant-tax-problems-and-they-could-get-worse; and âCrypto-Assets: Implications for Financial Stability, Monetary Policy, and Payments and Market Infrastructures.â ECB Occasional Paper, no. 223 (May 17, 2019), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3391055. [^TechnologySocietyImpact]: Tristan Harris, âEthics for Designers â How Technology Hijacks Peopleâs Minds â from a Magician and Googleâs Design Ethicist,â Ethics for Designers, March 4, 2017, https://www.ethicsfordesigners.com/articles/how-technology-hijacks-peoples-minds; https://www.youtube.com/watch?v=7LqaotiGWjQ; and Daniel Schmachtenberger, âExplorations on the Future of Civilization,â n.d. https://civilizationemerging.com/. [^SurveillanceCapitalism]: Shoshana Zuboff, The Age of Surveillance Capitalism: The Fight for a Human Future at the New Frontier of Power, (New York, NY: PublicAffairs, 2019); Cathy Oâneil, Weapons of Math Destruction: How Big Data Increases Inequality and Threatens Democracy, (New York: Crown, 2016); Evangelos Simoudis, The Big Data Opportunity in Our Driverless Future. (Menlo Park, Ca: Corporate Innovators, Llc, 2017); Philippe Aghion, Benjamin Jones, and Charles Jones, âArtificial Intelligence and Economic Growth,â 2017, https://web.stanford.edu/~chadj/AI.pdf; Ford, Martin, Rise of the Robots: Technology and the Threat of a Jobless Future, (New York: Basic Books, 2015); Kai-Fu Lee, AI Superpowers China, Silicon Valley, and the New World Order, (Boston: Houghton Mifflin Harcourt, 2018); David Brin, The Transparent Society: Will Technology Force Us to Choose between Privacy and Freedom? (New York: Basic Books, 1999); Safiya Noble, Algorithms of Oppression: How Search Engines Reinforce Racism (New York: New York University Press, 2018); and Virginia Eubanks, Automating Inequality: How High-Tech Tools Profile, Police, and Punish the Poor, (New York: St. Martinâs Press, 2018). [^AIChallenges]: Meredith Broussard. Artificial Unintelligence: (Cambridge, Massachusetts: The MIT Press, 2018), https://doi.org/10.7551/mitpress/11022.001.0001; Cathy Oâneil, Weapons of Math Destruction: How Big Data Increases Inequality and Threatens Democracy, (New York: Crown, 2016); Ruha Benjamin, âRace after Technology: Abolitionist Tools for the New Jim Code,â Social Forces 98, no. 4 (December 23, 2019), https://doi.org/10.1093/sf/soz162; Victor Margolin, The Politics of the Artificial: Essays on Design and Design Studies, (Chicago: The University of Chicago Press, 2002). [^AIandInequality]: Daron Acemoglu, and Pascual Restrepo, âThe Race between Man and Machine: Implications of Technology for Growth, Factor Shares, and Employment,â American Economic Review 108, no. 6 (June 2018): 1488â1542. https://doi.org/10.1257/aer.20160696; Jonathan Haskel, and Stian Westlake, âCapitalism without Capital: The Rise of the Intangible Economy (an Excerpt),â Journal of Economic Sociology 22, no. 1 (2021): 61â70, https://doi.org/10.17323/1726-3247-2021-1-61-70; Ajay Agrawal, Joshua Gans, Avi Goldfarb, and Catherine Tucker, The Economics of Artificial Intelligence, (Illinois: University of Chicago Press, 2024). [^MarketPower]: Jan De Loecker, Jan Eeckhout, and Gabriel Unger. âThe Rise of Market Power and the Macroeconomic Implications,â The Quarterly Journal of Economics 135, no. 2 (January 23, 2020): 561â644, https://doi.org/10.1093/qje/qjz041; John Barrios, Yael V. Hochberg, and Hanyi Yi. âThe Cost of Convenience: Ridehailing and Traffic Fatalities,â SSRN Electronic Journal, 2019, https://doi.org/10.2139/ssrn.3361227; and Tali Kristal, âThe Capitalist Machine: Computerization, Workersâ Power, and the Decline in Laborâs Share within U.S. Industries,â American Sociological Review 78, no. 3 (May 29, 2013): 361â89. https://doi.org/10.1177/0003122413481351. [^AuthoritarianTech]: Kai-Fu Lee, AI Superpowers China, Silicon Valley, and the New World Order, (Boston Houghton Mifflin Harcourt, 2018); Bruce Dickson, The Dictatorâs Dilemma: The Chinese Communist Partyâs Strategy for Survival, (Oxford, England, New York: Oxford University Press, 2016); Nick Couldry, and Ulises Mejias, âData Colonialism: Rethinking Big Dataâs Relation to the Contemporary Subject,â Television & New Media 20, no. 4 (September 2, 2019): 336â49. Steven Feldstein, The Rise of Digital Repression: How Technology Is Reshaping Power, Politics, and Resistance, (New York: Oxford University Press, 2021).