The Technology Trap

by Carl Benedikt Frey

  Examples of technological advances emerging from necessity are in fact seemingly few before the Industrial Revolution. Indeed, Joel Mokyr’s magisterial review of technological developments in the preindustrial world suggests that “invention is the mother of necessity,” provides a more accurate description of preindustrial inventive efforts.13 Instead of technologies being developed in response to some preexisting demand, sporadic technological advances created previously unrecognized desires and new demand. Technological progress was often random and unpredictable, as was the demand that sometimes emerged from it. For example, Gutenberg’s printing press created demand for books, education, and literacy—rather than a demand for books leading to the invention of the press. And other inventions were simply the result of serendipitous discoveries. When hunter-gatherers during the Ice Age first noticed residues of limestone and burned sand in their hearths, they could not possibly have foreseen how millennia of accidental discoveries would lead to the first Roman glass windows.14 Similarly, when Evangelista Torricelli discovered that the atmosphere has weight, he could not have predicted the chain of events that would culminate in the invention of the steam engine.

  The view that new technology creates its own demand implies that the lack of preindustrial growth was primarily a consequence of obstacles to the supply of technology. In support of a supply-driven explanation, a number of theories have pointed to different factors that are likely to have held the supply of technology back in the preindustrial era. For example, while it is widely acknowledged that entrepreneurial risk taking is critical to technological progress, it is rarely noted that innovation was riskier and less rewarding in preindustrial times. Before the age of mass production and the arrival of social safety nets, the upside of entrepreneurial risk taking was low, and the potential downside much greater. The fortunes that could be won by inventors in the nineteenth and twentieth centuries were previously unattainable because markets for new technology were typically local and thus substantially smaller, and entrepreneurial failure could at worst lead to starvation. In addition, because technological advances in preindustrial times often remained local, technologies used in one place that might have guided future technological advances in another location were often unknown there. Such path dependence sometimes put societies on technological dead-end trajectories. For example, in large parts of North Africa and the Middle East, the invention of the camel saddle (which occurred sometime between 500 and 100 B.C.) meant that the camel gradually replaced wheeled transportation, which reduced the resources available for building roads and bridges and led to poor infrastructure and lower incentives to innovate in other modes of transportation. However, as noted above, even though invention was a risky activity and it took time for technical knowledge to diffuse, pathbreaking technologies like the printing press were still developed and adopted.15

  More importantly, although economists often are dismissive of culture as being an obstacle to economic development, there are good reasons to believe that beliefs long prohibited progress. An influential theory, championed by Mokyr, has maintained that the scientific revolution of the seventeenth century prepared the ground for a culture of growth.16 There is probably much truth to this. A culture that replaced superstition with reason and a scientific attitude, which the sociologist Max Weber deemed critical to technological progress, did not appear before the Enlightenment.17 And superstition aside, most preindustrial intellectuals saw no virtue in mechanization. They shared the cultural attitudes of classical philosophers toward technological development, as aptly summarized by Bertrand Russell: “Plato, in common with most Greek philosophers, took the view that leisure is essential to wisdom, and is therefore not to be found among those who have to work for their living.”18 Indeed, in Politics, Aristotle wrote that “no man can practice virtue who is living the life of a mechanic or laborer.”19 In other words, work—especially the manual sort of work that was required for the construction of machines—was deemed unworthy by many of the greatest minds of classical times. Yet while the views of the upper classes in eighteenth-century Britain were little different from the nonprogressive beliefs of ancient philosophers, the beliefs of the middle or producing classes were subject to more profound change, and central to this change was the changing nature of religious beliefs. Although the relationship between technology and religion has always been a complex and tenuous one, it is indisputable that religious beliefs changed in preindustrial Europe, and with them attitudes toward technological progress. The Romans and the Greeks regarded nature as the domain of the gods: any manipulation of its forces by means of technology was considered sinful and even dangerous. This stands in contrast to medieval Christianity, which historians have argued paved the way for future technological progress as it embraced a more rational God. As Lynn White explains, “Christianity, in absolute contrast to ancient paganism and Asian religions … not only established a dualism of man and nature but also insisted that it is God’s will that man exploit nature for his proper ends.”20

  There is no way to prove causality, but the notion that “if God would have wanted man to fly, he would have given him wings,” was clearly rebelled against within the Latin Church. The writings of the Franciscan friar Roger Bacon in the thirteenth century envisioned the emergence of steamships, automobiles, and airplanes; and the monk Eilmer of Malmesbury similarly felt no sense of sin when attempting to fly using a glider.21 In some ways, the clergy even facilitated technological development. The teachings of the Benedictine order, which had enormous impact on medieval life, emphasized that work and production are virtuous and could provide a way to salvation. This is not to suggest that Christianity was always favorable to progress. The famous controversy surrounding Galileo’s support of heliocentrism, which made him guilty of heresy and led to his imprisonment, suggests the contrary. However, while there can be no doubt that the oppression of science by the Latin Church was an obstacle to some inventive pursuits, early industrialization had no scientific basis. The steam engine was a latecomer to the industrialization process. Science became a pillar of economic progress only in the nineteenth century. As Mokyr writes, “Many of the ‘wave of gadgets’ that we associate with the classical Industrial Revolution—steam power being the most notable exception—could have been easily made with the knowledge available in 1600. What is beyond question is that the relative importance of science to the productive economy kept growing throughout the late eighteenth and nineteenth centuries, and became indispensable after 1870, with the so-called second Industrial Revolution.”22

  Another explanation for the time and place of the beginning of the Industrial Revolution is that institutions in the preindustrial world did more to prohibit innovation than they did to encourage it. Inspired by the pioneering work of Douglass C. North, many economic historians have argued that it was only after the Glorious Revolution of 1688–89, when the English Parliament gained supremacy over the crown, that the preconditions for the Industrial Revolution were established.23 Before then, rent-seeking monarchs and other so-called economic parasites found it easier to extract revenue from others than to take part in productive activities, which required hard work. Article 4 of the Declaration of Rights of 1689 changed the rules of the game, as Britons could no longer be taxed without their consent. Without the authorization of Parliament, levying money for the use of the crown was deemed illegal. But while this was surely an important event, explaining the long absence of any Industrial Revolution is not just a matter of identifying variables that might have held back technical progress in general. As noted, preindustrial culture and institutions did not hinder all progress. Considerable technical progress was achieved before the eighteenth century. The critical difference, it seems, was that governments before the Glorious Revolution frequently attempted to block worker-replacing technologies, and the key inventions of the Industrial Revolution were worker replacing.

  Origins of the Industrial Revolution

  So how did the necessary instit
utional change occur that would one day facilitate the Industrial Revolution? One compelling argument is that the road to industrialization began with the discovery of the New World. Daron Acemoglu, Simon Johnson, and James Robinson have demonstrated that where political institutions placed significant checks and balances on the monarchy, the growth of Atlantic trade strengthened merchant groups by constraining the power of the crown and helped them obtain institutional reform that favored industrial and technological progress.24 Consequently, more rapid economic growth took place in economies with relatively nonabsolutist institutions—like those of Britain and the Dutch Republic—where commercial groups outside the royal circle were the key beneficiaries from trade. In Britain, for example, Parliament successfully prevented several attempts of both Tudor and Stuart monarchs to create royal monopolies, and consequently trade was typically carried out by merchants, either individually or in commercial partnerships. This stands in contrast to most of Europe, where royal trading monopolies prevailed. In the Portuguese case, trade with Africa and Asia was restricted to the royal trading house Casa da Índia. Casa de Contratación in Seville served the equivalent function for the Spanish empire, where colonial trade was a monopoly of the crown of Castille. And in France, the political influence of merchants diminished, if anything.25 Though early Atlantic trade enriched some commercial groups outside the royal circle—especially the Protestant Huguenots—the siege of La Rochelle meant that the Protestant church was eventually banned by Louis XIV, leading most Huguenots to leave France.26 In countries whose parliament failed to provide checks on the power of the executive, trade remained firmly under the control of the crown.

  FIGURE 4: Activity Index of European Parliaments, 1188–1789

  Source: J. L. Van Zanden, E. Buringh, and M. Bosker, 2012, “The Rise and Decline of European Parliaments, 1188–1789,” Economic History Review 65 (3): 835–61.

  Note: The activity index counts the number of years per century in which a parliament was assembled for official sessions. If the index is zero, no parliament was convened. If the value is 100, a parliament was convened in every year of the century.

  The power struggle between parliaments and the crown was at the heart of many of the major sociopolitical conflicts, including the Dutch Revolt of the 1570s, the English Revolution of the 1640s, and the French Revolution of 1789.27 The outcome of these conflicts in the North Sea countries, and the long absence of them in other parts of Europe, meant that the influence of parliaments declined in southern and central Europe, while parliaments gained in importance in the Dutch Republic and Britain. The economic historians Jan Luiten Van Zanden, Eltjo Buringh, and Maarten Bosker have found that colonial Europe experienced a sustained period of institutional divergence between 1500 and 1800.28 As parliamentary activity in the North Sea countries surged, it declined elsewhere in Europe (figure 4). The political clout and activity of the parliament in France increased up until the mid-1500s but then decreased as the crown found ways to introduce taxes without approval of the Estates General. In Spain, the great discoveries associated with the New World (mainly silver and gold) resulted in new sources of income for the crown, which reduced the need to raise taxes—for which parliamentary approval was required. Convening Parliament was therefore no longer a necessity.

  The increase in parliamentary activity in the North Sea countries can be explained by a series of events. In the Dutch case, commercial interests associated with the Atlantic trade led to conflict between Dutch merchants and the Habsburg monarchy—which ruled the Netherlands before the Dutch Revolt—and culminated in a war of independence in the 1570s. Merchants constituted the primary political force on the side of independence and naturally became the new ruling class as the Estates of Holland and the Estates-General of the northern Low Countries assumed sovereignty and created the Dutch Republic. In Britain, institutional change was shaped by the Civil War of 1642–49, when parliamentarian forces defeated the royalists, which led to the trial and execution of Charles I and subsequently the Glorious Revolution of 1688, when a coalition of English parliamentarians and Dutch military forces replaced James II with a constitutional monarchy led by the Dutch stadtholder William of Orange. The victory of Parliament in the Civil War meant that the fraction of members of Parliament who were sympathetic to industry increased dramatically.29 What’s more, the Glorious Revolution, which resulted in the Bill of Rights of 1689, restricted the ability of the crown to rule the country arbitrarily. The Mutiny Act, for example, forbade the crown to form and maintain a standing army without Parliamentary assent, which limited the ability of monarchs to overthrow Parliament militarily. By shorting the period for which taxes were granted, Parliament gained further political clout, as the crown had to convene Parliament regularly to cut a new deal. Also, to prevent the crown from controlling Parliament from within, new defenses were erected against seat and vote buying.30

  The result was not only a shift of political power from the crown to Parliament, but also a shift of influence in favor of merchant manufacturers. Though merchants were hardly a majority group in Parliament, their interests were protected by the formation of the Whig coalition, which represented merchants and Protestant landowners.31 Meanwhile, the landed aristocracy—whose members largely controlled the levers of political power before 1832—did not contribute very much to innovation and the mechanization of industry, but at least they didn’t resist it.32 This was in part because Britain’s history as a trading nation had allowed them to diversify their wealth, so that some even stood to benefit from industrialization.33 While the Glorious Revolution effectively marked the beginning of its slow decline, the House of Lords still looked after landed interests until the early twentieth century. Consequently, the British aristocracy were able to hold onto some of their powers and feel less threatened by the shifts in social and economic power that were taking place in the rest of society.34

  All of this meant that Parliament increasingly acted to safeguard commercial and industrial interests. Contracts were enforced, and property rights were regarded above all. As Adam Smith observed in 1776, “security which the laws of Great Britain give to every man that he shall enjoy the fruits of his own labour is alone sufficient to make any country flourish.”35 Of course, not all institutions favored economic and technological development. The poor had limited access to education and could not serve on juries. Even with the Reform Acts of 1832 and 1867, most ordinary citizens did not have political rights. And the economic logic of many Parliamentary decisions was still guided by the flawed doctrine of mercantilism: the belief that trade is a zero-sum game. Some acts of Parliament prohibited the exportation of machinery and the emigration of artisans. Others were passed to protect British commerce and manufacturing from foreign competition. But even though Britain was by no means a modern democracy and lacked many of the characteristics of a laissez-faire economy, it had become a much more diverse, tolerant, and industrious society. Writing in 1689, John Locke observed that “toleration has now at last been established by law in our country.”36 People enjoyed freedom of expression and choice of occupation and were able to engage in just about any scientific and inventive activities they wanted, and merchants mixed with the landed classes. During his stay in Britain, Voltaire wrote that “the younger son of a peer will not look down upon business. Lord Townsend, a Cabinet Minister, has a brother who is content with leading a firm in the City.”37 And based on his travels in the early eighteenth century, Daniel Defoe writes about the English tradesman: “Trade is so far here from being inconsistent with a gentleman, that, in short, trade in England makes gentlemen: for, after a generation or two, the tradesmen’s children, or at least their grandchildren, come to be as good gentlemen, statesmen, Parliament men, Privy Councillors, judges, bishops, and noblemen, as those of the highest birth and most ancient families.”38

  Such a state of affairs was unheard of outside the North Sea countries. Indeed, the relative influence of the merchant class in Britain is most evident when observ
ing continental Europe, where—excepting the Dutch Republic—industry and commerce was controlled by the crown. In France, for example, Jean-Baptiste Colbert, who served as minister of finance under Louis XIV, was of the view that industrial development required state support, which he deemed critical to bringing the country back from the brink of bankruptcy. To grow the economy and make France self-sufficient in the production of luxury goods, Colbert established the Manufacture Royale de Glaces de Miroirs in 1665—among other state-run factories—to supplant the importation of Venetian glass, which was banned as soon as the French glass manufacturing industry was on solid footing. Statistical classifications drawn up by the inspectors of manufactures, which divided manufacturing industries into three categories, show the immense influence of the crown. First, there were the state factories funded by the royal treasury: the goods produced by these industries were mainly luxury articles enjoyed solely by the crown. The famous Manufacture des Gobelins, for example, employed legions of artisans who worked only at the crown’s pleasure and embellished Versailles, Saint-Germain, and Marly. Second, the manufactures royales represented private enterprise producing for public consumption upon formal invitation of the crown in designated districts. And lastly there were the manufactures privilégiées, which enjoyed a royal monopoly for the production and sale of certain goods. All of these industries knew no competition, there was no mechanization, and manufacturing survived solely due to the support and patronage of the crown.39