In bed each night, I’ve been slowly reading through Terry Pratchett’s The Truth. It tells the story of the rise of the newspaper in Ankh-Morpork. As expected, it is very amusing with an abundance of lines like, “He was the younger son in any case, and family tradition sent youngest sons into some church or other, where they couldn’t do much harm on a physical level.” But there is an equal amount of wisdom. In particular, it touches on one of the great intellectual boondoggles of our time: creative destruction.
As the term is normally used, creative destruction is the almost biblical process of one business (or even industry) taking over for another less efficient business. The key is that we should all applaud this because the process makes us all better off in the long run. And it is largely true — assuming that the economy is working as it should. Of course, the economy is never working as it should — a discussion I will come back to shortly.
In The Truth, movable type comes to Ankh-Morpork. This development does not make the engravers of the city happy. They quickly see their incomes disappear. But movable type allows for William de Worde to start The Ankh-Morpork Times — a daily newspaper. Previously, he had created small numbers of newsletters on an infrequent basis for very rich people in other cities. It’s little more than a gossip sheet. But he quickly finds that there is no problem putting out a sheet of news every day. And he can sell it for very little, so it is widely distributed. The money begins pouring in.
It’s clear that William is not alone. The availability of movable type makes printing available to a lot of people who could never have afforded it previously. In the book (as far as I’ve read), the engravers decide to go into the movable type business. But there is a more obvious use for them, which William realizes on his second day of being a newspaper publisher: pictures. So he hires a vampire photographer, Otto Chriek, and the rest is economics. At that point, the economy has stabilized because now the engravers can be used for more sophisticated work — leaving the typesetting to the new technology.
This creative destruction should make the entire town of Ankh-Morpork richer. They are, after all, producing far more stuff with the same number of people. And this shouldn’t just happen there. It should happen anywhere that an innovation increases productivity. Sadly, we do not see this in our own economy. But we used to! As Josh Bivens and Lawrence Mishel showed, from 1948 to 1973, the median worker’s wage went up at the rate of productivity growth. From 1974 to 2014, the productivity has increased roughly at the same rate, but wages have stagnated.
Obviously, the gains from productivity from such creative destruction had to go somewhere. And we know where that somewhere is. There has been a huge increase in income inequality. The extra money was simply captured by those who were already at the top of the economy. This is what happens when workers have no leverage. When unions were strong in this nation, they saw to it that workers got a share of the gains. Of course, ultimately it isn’t about unions but about the government limiting the power of unions. This started in 1947 with the Taft–Hartley Act. It just took 25 years before the constant assault on unions really paid off for the power elite.
This is something that bugs me about people who claim that we have nothing — economically speaking — to fear from automation. Overall, I agree with the idea. But in the context of a government that is determined to funnel money from the bottom of the income base to the top, we really could see huge increases in productivity that result only in more money for the rich. But as The Truth shows, it shouldn’t be like this. And it doesn’t need to be like this. And if the power elite were smart (and they show very few signs of being so) they would allow more of the gains to be shared. When you hold down the vast majority of the population, bad things happen.
Graph taken from Understanding the Historic Divergence Between Productivity and a Typical Worker’s Pay. Licensed under fair use.