I find it kind of amusing that in a very short time the public discussion of the dangers lying ahead has moved from the great stagnation to excessive automation. That is, we stopped talking of productivity stalling, to start worrying about productivity growing too much.

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Whither the debate, pessimists tend to outnumber optimists – but that’s no news. Few pessimists are as articulate as Tyler Cowen. David has already written an excellent critique of Cowen’s last piece for Bloomberg.
David is clearly pointing out some of the weaknesses of the piece, but doesn’t comment much on a point raised by Cowen which I found quite bizarre.

Writes Cowen:

Industrialization, and the decline of the older jobs in agriculture and the crafts economy, also had some pernicious effects on social ideas. The early to mid-19th century saw the rise of socialist ideologies, largely as a response to economic disruptions. Whatever mistakes Karl Marx made, he was a keen observer of the Industrial Revolution, and there is a reason he became so influential. He failed to see the long-run ability of capitalism to raise living standards significantly, but he understood and vividly described the transition costs and the economic volatility.

David’s reply is that there are alternative explanations for the rise of socialism, one of them being Schumpeter’s. Joseph Schumpeter maintained that by allowing for mass education, bourgeois capitalism has actually nurtured a class of people that opposed it deeply. For one thing, socialist intellectuals are an outcome of the same critical reasoning that before brought people to question feudal institutions and so helped in the formation of the liberal order, which made capitalism possible. But, at the same time, the problem with mass education is that it ends up with an oversupply of intellectuals, who in turn became enraged at not being properly appreciated by the market and thus start despising it.

Hayek instead pointed out the importance of flawed intellectual history in bringing millions to socialism. Think about a text as influential as Engels’s “The Condition of the Working Class in England“. That work shaped the understanding of the Industrial Revolution of many: not only professional historians, but the general public, too. And yet, with the benefit of hindsight, one can’t but smile today when he reads Engels arguing that the introduction of machinery has killed upward social mobility, making the proletariat for the first time a “permanent class of the population, whereas it had formerly often been merely a transition leading to the bourgeoisie”.

David already pointed out that the Industrial Revolution should be compared with what happened before (centuries in which private per capita consumption didn’t grow much at all). I would add that if Marx and Engels were perceived by contemporaries as keen observers of the industrial revolution, this doesn’t necessarily mean they “got” it – and they certainly got its long term consequences wrong. This is hardly a trivial mistake, as Marx was engaged in nothing less than deciphering the direction of history.

On the top of that, Cowen’s point seems to be that we should be very wary of the transition costs of innovation because they got us socialism. OK. But now we already had socialism: it can perhaps find new acolytes but it will hardly be a novelty. Some good news is that Douglas Rushkoff doesn’t seem to be as compelling as Karl Marx was. More good news is that we have experience, let alone historical knowledge, that may allow us to put some arguments in perspective. For one thing, we can’t buy into prophecies that are built on assumptions that imply that the past could not have been. “This time is different!” – or maybe not.

I guess Tyler fears not so much socialism in new clothes, but some, new dark ideologies on the rise. It seems to me that even socialism in a way was just a new dress for a deep rooted attitude: nostalgia. Human beings tend to share a strong “anti-present bias”. We systematically long for an unattainable return to the past, or a glorious future yet to come, debasing the blessings of the times we’re living through. This is true in personal relationships and in our attitudes towards workplaces, as well as in politics. For some people this is what motivates thrift and hard work; for others this just leads to day dreaming, while others become wanna-be revolutionaries. My gut feeling is that political nostalgia may be the venom poisoning societies that are rapidly ageing (thus having more people naturally inclined to long for the past instead of for the future).

It seems rather commonsensical to claim that socialism was a consequence of industrialisation. Let’s assume that’s true. Can we say that it would have been worth not having the Industrial Revolution, just for avoiding the Russian Revolution? I’m not quite sure. Nor I am sure that the link between the two is so obviously straightforward. For one, socialism never got truly revolutionary (so really “dangerous”, in Tyler’s view) in England, the country that perhaps got closer to having a “laissez faire industrialization”. Was that just because conflict was at some point internalized in the political system? Or did culture, including political culture, play a role? Or perhaps did people perceive the benefits of that transformation process, together with the apparent drawbacks?

Socialism became a revolutionary force in Russia well before the country became industrialised and thus could experience the “transition costs” of industrialisation. Ditto for China.

I don’t want to argue that we close our eyes in front of the “transition costs” of innovation, or pretend they do not exist. But the kind of balanced approach Cowen cares for would be served better by not painting intellectual history with such a big brush.