The Technology Trap

The Technology Trap Plot Summary

Introduction

In 1811, a group of English textile workers known as Luddites smashed the mechanical looms they believed were stealing their livelihoods. The British government responded by deploying 12,000 troops—more than they had sent to fight Napoleon in Spain. This dramatic confrontation represents just one chapter in the long, complex relationship between technological progress and human labor. Throughout history, new technologies have created unprecedented wealth while simultaneously disrupting established ways of life, raising a persistent question: Who benefits from innovation, and who bears its costs? This historical journey reveals surprising patterns that challenge our assumptions about progress. We'll discover periods when productivity soared while workers' wages stagnated for decades, and other times when technological advancement created broad prosperity across society. By examining these different outcomes, we gain crucial insights into our current technological revolution. This exploration is essential for anyone concerned about automation, artificial intelligence, and their impacts on employment and inequality—whether you're a policymaker, business leader, or simply someone wondering how technological change might affect your own economic future.

Chapter 1: Pre-Industrial Resistance: Guilds Against Machines (Pre-1750)

Before the Industrial Revolution transformed the world, technological innovation proceeded at a much slower pace, yet still faced significant resistance when it threatened established ways of working. Throughout medieval and early modern Europe, the economy was organized around guilds—associations of craftsmen who controlled production in specific trades. These powerful organizations set quality standards, regulated who could practice a trade, and fiercely defended their members' economic interests against technological disruption. When new labor-saving devices appeared, guild opposition was often swift and effective. In 1589, when William Lee invented a mechanical knitting frame that could produce stockings much faster than hand knitting, Queen Elizabeth I denied him a patent, reportedly telling him: "Consider what the invention could do to my poor subjects. It would assuredly bring them ruin by depriving them of employment." Similar resistance occurred across Europe. In Danzig in 1561, the city council ordered the execution of an inventor who had created a ribbon-weaving machine that could replace several workers. The council declared that the device would "bring the ruin of all ribbon weavers," and had the machine publicly burned. The political economy of pre-industrial Europe generally favored technological conservatism. Rulers worried that labor-replacing machines would create unemployment, leading to social unrest and reduced tax revenue. In 1623, when a new sawmill was introduced in England that could do the work of thirty men, it was destroyed by a mob. The government made no effort to protect the innovation. Similarly, when mechanical gig mills for finishing cloth appeared in the 16th century, Parliament passed laws restricting their use to protect traditional cloth workers. These weren't isolated incidents but reflected a widespread pattern where political authorities sided with workers against potentially disruptive technologies. What technological progress did occur during this period typically enhanced rather than replaced human labor. The printing press, for example, created entirely new industries while making books more accessible. Improvements in shipbuilding and navigation expanded trade opportunities. Agricultural innovations like crop rotation increased food production without eliminating farming jobs. These "enabling technologies" faced less resistance because they complemented existing skills rather than rendering them obsolete. The pre-industrial era's approach to technology began changing in the late 17th century, particularly in England. The Glorious Revolution of 1688 shifted power from the monarchy to Parliament, where commercial interests had greater influence. Patent laws were strengthened to protect inventors' rights, and courts increasingly ruled against guild restrictions. These institutional changes, combined with Britain's growing involvement in international trade, created conditions where labor-replacing technologies could finally flourish. The stage was set for the dramatic transformation that would follow—the Industrial Revolution, which would fundamentally reshape the relationship between technology and labor.

Chapter 2: Engels' Pause: The First Industrial Revolution (1760-1840)

The period from 1760 to 1840 witnessed one of history's most profound economic transformations—the Industrial Revolution. Beginning in Britain, this era saw mechanical power replace human and animal muscle on an unprecedented scale. The textile industry led the way, with inventions like James Hargreaves' spinning jenny (1764), Richard Arkwright's water frame (1769), and Edmund Cartwright's power loom (1785) revolutionizing cloth production. By 1830, a single worker using these machines could produce as much yarn as 200 hand-spinners could in 1760, representing an extraordinary leap in productivity. Yet this technological revolution created a puzzling paradox. Despite dramatic increases in output, ordinary workers saw little improvement in their living standards for decades. Economic historians call this phenomenon "Engels' Pause," named after Friedrich Engels who documented the misery of the working class during this period. Between 1760 and 1830, output per worker in Britain grew by approximately 46 percent, yet real wages increased by only 4 percent. The fruits of technological progress flowed almost entirely to factory owners and investors rather than to workers. Income inequality soared to unprecedented levels, with the share of national income going to the top 5 percent of the population increasing dramatically. The human cost of this economic transformation was severe. As production moved from homes and small workshops to factories, working conditions deteriorated dramatically. Children as young as five or six worked fourteen-hour days in dangerous conditions. Housing in rapidly growing industrial cities was overcrowded and unsanitary, with families often living in single-room cellars. Life expectancy in Manchester fell to just 17 years by the 1830s. Factory discipline was harsh, with workers fined or beaten for minor infractions. As one contemporary observer noted, "The factory system has produced a race of men, feeble in body and mind, and in a state of moral degradation." Worker resistance to mechanization intensified during this period. The most famous example was the Luddite movement of 1811-1816, when skilled textile workers destroyed the machines they believed were taking their jobs. The government responded with harsh repression, making machine-breaking a capital offense and deploying troops to industrial areas. Unlike in previous centuries, political authorities now sided firmly with industrialists rather than workers. The reason was simple: Britain's competitive position in international trade depended on mechanization, and the new industrial class had gained significant political influence. By the 1830s and 1840s, the social tensions created by Engels' Pause had become politically unsustainable. Reform movements gained strength, leading to the Factory Acts that limited child labor and improved working conditions. Labor organizations emerged despite legal restrictions, giving workers greater bargaining power. Educational reforms expanded access to schooling, helping workers adapt to the changing economy. These social innovations, combined with continued technological progress that created new job opportunities, eventually brought Engels' Pause to an end. By the 1850s, real wages finally began rising consistently with productivity, setting the stage for the broader prosperity that would follow in the late 19th century.

Chapter 3: The Great Leveling: Technology Creates Middle Class (1870-1970)

Between 1870 and 1970, a remarkable transformation occurred across Western economies. This century witnessed what economists call "the Great Leveling"—a period when technological progress consistently created more and better jobs than it destroyed. Unlike the First Industrial Revolution, which primarily benefited capital owners, this Second Industrial Revolution produced broadly shared prosperity and created a large middle class for the first time in history. The technological foundation of this transformation was the development of electricity and the internal combustion engine. Electrification revolutionized both factories and homes. In factories, electric motors allowed each machine to have its own power source, replacing the complex and dangerous system of belts and shafts driven by central steam engines. This not only improved efficiency but created safer, cleaner working environments. In homes, electric appliances dramatically reduced the time required for domestic labor. A 1945 study found that an electric washing machine saved over four hours of labor per load compared to hand washing. This household revolution enabled women to enter the paid workforce in unprecedented numbers, further expanding economic opportunities. The automobile similarly transformed society and created millions of new jobs. When Henry Ford perfected the moving assembly line in 1913, he could produce cars affordably for the middle class while paying workers the then-remarkable wage of $5 per day—more than double the prevailing rate. The automobile industry directly employed hundreds of thousands, but its impact extended much further through supporting industries like steel, rubber, glass, and road construction. The interstate highway system, begun in the 1950s, further expanded economic opportunities by connecting markets and enabling suburbanization. What made this period unique was that technological change was predominantly "skill-enhancing" rather than "skill-replacing." New machines required operators, maintenance workers, and supervisors. The telephone system needed installers and operators. Electrified factories required electricians. These were middle-skill jobs accessible to people with high school education but not necessarily college degrees. Meanwhile, public education expanded dramatically, with high school graduation rates rising from about 6% in 1900 to over 70% by 1960, giving workers the skills needed for these new jobs. The benefits of productivity growth during this period were widely shared. Income inequality, which had been extreme during the Gilded Age, declined substantially between 1940 and 1970, creating what economists call "The Great Compression." The labor share of national income—the portion going to workers rather than capital owners—remained stable at around 65 percent. Strong labor unions, progressive taxation, and government programs like the GI Bill helped ensure that technological progress translated into broad-based prosperity. By the 1960s, economists had become remarkably optimistic about capitalism's ability to deliver shared prosperity, with Simon Kuznets theorizing that inequality would naturally decrease as economies developed. This golden age demonstrates that with the right institutions and policies, technological advancement can create an expanding middle class rather than hollowing it out. The key was that innovation complemented human labor rather than simply replacing it, while social institutions ensured that productivity gains were widely distributed. This historical experience provides important lessons as we navigate today's technological transitions.

Chapter 4: Digital Disruption: Computers and Wage Stagnation (1980-2010)

The period from 1980 to 2010 marked a profound shift in how technology affected labor markets. The computer revolution, unlike previous technological waves, didn't simply automate routine physical tasks but began tackling cognitive tasks as well. This fundamental change reversed many patterns from the previous century, leading to what economists call "job polarization"—the simultaneous growth of high-skilled, high-wage jobs and low-skilled, low-wage jobs, with a hollowing out of middle-class employment opportunities. The first personal computers appeared in the early 1980s, but their impact accelerated dramatically in the 1990s with the spread of the internet and increasingly powerful software. Initially, computers complemented many workers, making them more productive. However, as computing power increased exponentially (following Moore's Law), machines began replacing rather than augmenting human labor in many domains. Automated teller machines reduced the need for bank tellers. Word processors and desktop publishing software eliminated many typesetting jobs. Computer-aided design programs transformed drafting work. By the early 2000s, computerization had spread to nearly every industry, from manufacturing to retail, finance to healthcare. What made this technological wave different was its impact on the occupational structure. Previous technologies had generally eliminated the lowest-skilled jobs while creating new middle-skill positions. Computers, however, proved most effective at replacing routine cognitive tasks—the very foundation of many middle-class jobs. Bookkeepers, travel agents, secretaries, and middle managers saw their roles diminished or eliminated. Meanwhile, demand increased for both high-skilled workers who could use technology creatively (software engineers, financial analysts) and for low-skilled service workers performing non-routine manual tasks that remained difficult to automate (janitors, home health aides, restaurant workers). The economic consequences were significant. After decades of shared prosperity, wages began diverging dramatically by education level. College graduates saw their earnings rise substantially, while those with only high school diplomas experienced stagnant or declining real wages. The labor share of national income—the portion of economic output paid to workers rather than going to capital owners—declined significantly, falling from around 64% in the early 1980s to below 58% by 2010. This shift represented a transfer of approximately $750 billion annually from labor to capital by the end of this period. Geographically, the computer revolution created winners and losers. Cities with highly educated workforces like San Francisco, Boston, and Seattle thrived as technology hubs, while manufacturing centers in the Midwest and Northeast struggled with deindustrialization. This regional divergence had profound social consequences. Communities that lost middle-class jobs often experienced increases in family breakdown, substance abuse, and declining health outcomes—what economists Anne Case and Angus Deaton have called "deaths of despair." The computer revolution thus marked a return to patterns reminiscent of Engels' Pause—technological progress that increased overall productivity but left many workers behind. The key difference was that unlike the 19th century, when technology primarily displaced unskilled labor, computerization specifically targeted middle-skill jobs that had previously provided economic security for those without college degrees. This transformation set the stage for the growing economic anxiety and political polarization that would characterize the early 21st century.

Chapter 5: The AI Challenge: Balancing Innovation and Inclusion (2010-Present)

Artificial intelligence represents the next frontier in automation, with potentially far-reaching consequences for labor markets and society. Unlike previous waves of computerization that primarily affected routine tasks, AI systems can now perform complex cognitive tasks that were previously thought to require human intelligence. This technological leap is creating new divisions between winners and losers in the economy, while raising profound questions about how to ensure that innovation benefits society broadly. The current AI revolution began gaining momentum around 2012, when deep learning neural networks achieved breakthrough performance in image recognition. Since then, AI capabilities have expanded rapidly across domains. Natural language processing systems can now understand and generate human-like text, as demonstrated by large language models like GPT. Computer vision systems can identify objects and people with remarkable accuracy. Robots equipped with AI can navigate complex environments and manipulate objects with increasing dexterity. These advances suggest that many jobs previously considered safe from automation—from truck drivers to radiologists, legal assistants to financial advisors—may face disruption in coming decades. The economic impacts of these technologies are already becoming visible. Companies adopting AI have seen productivity gains, but these benefits have flowed disproportionately to highly educated workers and capital owners. A study by economists Daron Acemoglu and Pascual Restrepo found that industries with greater AI adoption have experienced declining labor shares and increasing wage inequality. Meanwhile, workers displaced by automation often struggle to find comparable employment. Research suggests that only about one-third of workers who lose their jobs to automation find new positions that pay at least 90 percent of their previous wages. Public anxiety about these changes is evident in opinion surveys and political trends. According to a 2018 Pew Research Center survey, 72 percent of Americans expressed worry about a future where robots and computers can do many human jobs. This anxiety has contributed to growing political polarization, with support for populist candidates increasing in regions more exposed to automation. As economist David Autor notes, "When workers lose career jobs in mature industries, they often experience prolonged hardship. This has contributed to public disaffection and a growing distrust of experts, business leaders, and politicians." Yet history suggests that technological transitions can be managed to produce broadly shared benefits. The key is developing complementary institutions and policies that help workers adapt while ensuring that productivity gains are widely distributed. Education systems need reform to emphasize the uniquely human skills that complement rather than compete with AI—creativity, emotional intelligence, and adaptability. Social safety nets may need strengthening to support workers during career transitions. Labor market institutions like minimum wages and collective bargaining can help ensure that productivity gains translate into higher wages for all workers. The AI revolution also presents opportunities to address long-standing social challenges. AI-powered healthcare could improve outcomes while reducing costs. Educational applications could provide personalized learning experiences to students regardless of geography or economic background. Environmental monitoring systems could help combat climate change. The challenge for society is to harness these benefits while mitigating the disruptions that technological transitions inevitably create. As MIT economist Erik Brynjolfsson argues, "The key is not to slow down technology but to speed up our adaptation to it, ensuring that the benefits are shared broadly."

Chapter 6: Historical Lessons: Shaping Technology for Shared Prosperity

Throughout three centuries of technological change, a consistent pattern emerges: innovation creates both opportunities and disruptions, with the distribution of benefits depending critically on social and political institutions. This historical perspective offers crucial lessons for managing our current technological transition and shaping a future where AI and automation contribute to shared prosperity rather than deepening existing divides. Perhaps the most important lesson is that technological progress is not deterministic—its impacts depend on choices made by governments, businesses, and citizens. During Engels' Pause in the early Industrial Revolution, productivity growth diverged from wages for decades, creating widespread hardship despite overall economic expansion. The Great Leveling from 1870-1970 demonstrated that technology could create broadly shared prosperity when complemented by appropriate policies—progressive taxation, labor protections, and educational expansion. The computer revolution since 1980 has once again separated productivity growth from median wage growth, contributing to rising inequality and political polarization. Another crucial insight is that adjustment periods can last generations rather than years, creating sustained hardship if not properly managed. When hand-loom weavers were displaced by power looms in the early 19th century, many never found comparable employment, and their children grew up in poverty. Similarly, manufacturing workers displaced by automation and globalization since the 1980s have often experienced permanent downward mobility. These historical examples suggest that we should not expect market forces alone to quickly reabsorb workers displaced by AI. Proactive policies are needed to support those caught in technological transitions. The nature of skills demanded by the economy evolves with technology, requiring continuous adaptation of education systems. The expansion of public high schools in the early 20th century provided workers with the skills needed for electrified factories and growing service industries. Today, education systems need similar reinvention to prepare workers for an AI-powered economy. This means not just technical training but developing distinctly human capabilities that complement rather than compete with machines—creativity, complex problem-solving, emotional intelligence, and adaptability. Perhaps most fundamentally, history teaches us that technological progress and social welfare can be aligned through thoughtful institutional design. The labor movement of the early 20th century helped ensure that productivity gains from electrification and mass production were shared with workers. Strong antitrust enforcement prevented monopolies from capturing all the benefits of innovation. Progressive taxation and social insurance programs reduced inequality while providing security during economic transitions. Similar innovations will be needed in the age of AI. As we navigate today's technological revolution, we should remember that previous generations faced equally daunting challenges and eventually found ways to harness innovation for broad prosperity. With wisdom drawn from historical experience and commitment to inclusive growth, we can shape a future where artificial intelligence enhances human potential rather than diminishing it. The choice is not between embracing or rejecting technological progress, but between allowing it to benefit the few or ensuring it improves life for the many.

Summary

The three-century journey of technological transformation reveals a profound truth: innovation itself is neither inherently beneficial nor harmful to workers—what matters are the institutions and policies that determine how its fruits are distributed. During the First Industrial Revolution, productivity soared while workers endured decades of stagnant wages and harsh conditions. The century from 1870 to 1970 demonstrated that technology could create broadly shared prosperity when complemented by education, labor protections, and progressive policies. The computer revolution since 1980 has once again separated productivity from median wages, hollowing out middle-class jobs while concentrating gains among the highly educated and capital owners. Throughout this history, the key distinction has been whether technologies primarily complement human capabilities or simply replace them. As we face the AI revolution, these historical lessons offer crucial guidance. First, we must invest in education systems that develop distinctly human capabilities—creativity, social intelligence, and adaptability—that complement rather than compete with machines. Second, we need to strengthen institutions that ensure productivity gains are widely shared, from minimum wage laws to portable benefits for gig workers. Third, we should direct innovation itself toward technologies that enhance rather than replace human potential, perhaps through tax incentives or public research funding. Finally, we must recognize that managing technological transitions requires patience and compassion—providing adequate support for those whose skills are rendered obsolete while creating pathways to new opportunities. By learning from history's successes and failures, we can harness technology's immense potential while avoiding the social disruptions that have accompanied past technological revolutions.

About Author

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Carl Benedikt Frey

Carl Benedikt Frey is the Oxford Martin Citi Fellow and codirector of the Oxford Martin Programme on Technology and Employment at the Oxford Martin School, University of Oxford. He is also a senior fellow at the Institute for New Economic Thinking at Oxford and in the Department of Economic History at Lund University.

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