Robust private sector activities are essential for technological change and economic transformation. It is widely perceived that private sector investments are more effective due to their higher efficiency in utilizing resources. Private sector investments tend to use ideas much more and gain additional ideas through the positive effect of production experience. Knowledge creation is an unintended by-product of investment as such as firms increase the combination of their physical and human capital; they automatically improve their efficiency in production beyond the equivalent levels of the increase in capital. Private sector firms therefore tends to apply technical knowledge in their activities more and therefore are more likely to gain insights from capital goods that enhances production activities in their

In their drive to gain large control of markets, firms invest in R&D to improve quality and expand variety of their products. New discoveries of technology by firms through the combination of learning-by-doing and R&D are initially regarded as a private product and they enjoy some degree of preservation that gives them a measure of monopoly power over the discovery with the support of patent rights, in addition to secrecy of methods and codes of the technology. However, over time, competitive firms gain access to the new products from the market and analyse the new knowledge in them and make efforts to replicate or apply the ideas to create their own products with equivalent or even higher level of

Increase in a firm's capital stock leads to a parallel increase in its stock of knowledge through learning-by-doing. Each firm's knowledge is assumed to be a public good, so other firms can gain access to it at zero cost. This implies that knowledge spills over onto the entire economy so each firm's discovery of new knowledge (change in technology) impacts on the overall economy. Therefore, a firm's level of technology and by extension, the

There are two dimensions of spillover effects of technological change on private firms. The first is sustaining technologies, those that help organizations to make marginal improvements in what they do and requires only gradual change to modify existing systems and products. The second is termed disruptive technologies, those that involve fundamental and at times unexpected technological breakthrough that requires corporations to radically

particular sectors as well as the overall economy through spill over effects.

changes in its technology, is proportional to that of the overall economy.

of the people through social optimal growth of the economy.

private sector.

sophistication.

**4.3 Private sector**

#### **4.2 The role of the public sector**

Efficient functioning of government in discharging its responsibilities to create enabling condition for investments and thriving industrial production create opportunities for expansion of economic activities, which enhances the efficiency and effectiveness with which economic resources are utilized. Availability of efficient public services provides incentives for industrial production that leads to expansion of economic activities through interconnectedness of economic activities of various sectors of the economy. Large involvements of people in chain economic activities create opportunities for enhancing their capabilities to motivate innovation instincts to drive technological change.

This conforms to the fundamental development principle that the economic and social progress of any country depend largely on government's ability to generate sufficient revenues to finance an expanding programme of essential, non-revenue yielding public services (Todaro, 1994). Human capital formation, which is the bedrock of economic transformation and technological change, needs to be provided or strongly supported by governments through non-profit making principles. Production activities by all sectors of the economy is possible only if basic infrastructures and the rule of law that guarantees property rights (patents and copy right laws) are in existence. Economic transformation occurs in the course of development as public sector activities evolve through a system of revenues that accrue to the government and expenditures based on the varying and changing needs of the economy.

Although essential services (infrastructure, rule of law and human capital formation) are needed by all levels (household, firms and government), their non-excludability character means that firms with competitive profit maximizing objectives would not like to finance their provisions. Furthermore, there is the need for effective coordination to strengthen the significant relationship between consumption and production that is anchored on inputoutput mechanism that accentuates industrial production. The functions of providing essential services (public goods), which includes critical coordination of economic and social activities to align with aspiration of the society are functions that can only be undertaken by government based on its non profit and welfare provision disposition.

Thus, effectiveness of government's coordination and essential services provisions is a crucial component of the building blocks of economic transformation and technological change. For instance, sound educational and health service delivery will lead to the emergence of skilled and healthy workforce, a prerequisite for "effectiveness of labour", which in turn, is a key requirement for industrial production that leads to economic transformation and technological change. Beside, natural resource sectors which are the basic seeds from which economic activities germinate requires legal and institutional framework of operations and this can only be provided by government institutions.

There is complementarily between public services and private sector activities in the process of economic transformation and technological change. A robust and efficient system of government expenditures leads to high marginal products of labour and capital to individual firms. This is because of the quality of capital formation that occurs due to good educational and health provision functions of government. Government purchases a portion of private sector outputs with which it uses to provide free public services that is non rival and non excludable. Firms benefit from this as effective source of demand for their goods and services to be able to meet the wage requirements of the highly skilled labour and as well enhance their profit levels. This reflects in the high quality and large quantity of the aggregate output of the economy. In this context, government is a key factor in facilitating economic transformation and technological change in addition to enhancing the prosperity of the people through social optimal growth of the economy.

Adequate provision of basic needs of the society through the public sector machinery motivates private investments and enhances the productivity of factors of production to stimulate high sustainable economic growth. Thus, effective functioning of government creates the foundation upon which robust private sector activities spring to build upon existing ideas associated with economic activities through "learning-by-doing" and R&D activities. This provides opportunities for the emergence and effective contribution of the private sector.

#### **4.3 Private sector**

18 Technological Change

Efficient functioning of government in discharging its responsibilities to create enabling condition for investments and thriving industrial production create opportunities for expansion of economic activities, which enhances the efficiency and effectiveness with which economic resources are utilized. Availability of efficient public services provides incentives for industrial production that leads to expansion of economic activities through interconnectedness of economic activities of various sectors of the economy. Large involvements of people in chain economic activities create opportunities for enhancing their

This conforms to the fundamental development principle that the economic and social progress of any country depend largely on government's ability to generate sufficient revenues to finance an expanding programme of essential, non-revenue yielding public services (Todaro, 1994). Human capital formation, which is the bedrock of economic transformation and technological change, needs to be provided or strongly supported by governments through non-profit making principles. Production activities by all sectors of the economy is possible only if basic infrastructures and the rule of law that guarantees property rights (patents and copy right laws) are in existence. Economic transformation occurs in the course of development as public sector activities evolve through a system of revenues that accrue to the government and expenditures based on the varying and

Although essential services (infrastructure, rule of law and human capital formation) are needed by all levels (household, firms and government), their non-excludability character means that firms with competitive profit maximizing objectives would not like to finance their provisions. Furthermore, there is the need for effective coordination to strengthen the significant relationship between consumption and production that is anchored on inputoutput mechanism that accentuates industrial production. The functions of providing essential services (public goods), which includes critical coordination of economic and social activities to align with aspiration of the society are functions that can only be undertaken by

Thus, effectiveness of government's coordination and essential services provisions is a crucial component of the building blocks of economic transformation and technological change. For instance, sound educational and health service delivery will lead to the emergence of skilled and healthy workforce, a prerequisite for "effectiveness of labour", which in turn, is a key requirement for industrial production that leads to economic transformation and technological change. Beside, natural resource sectors which are the basic seeds from which economic activities germinate requires legal and institutional

There is complementarily between public services and private sector activities in the process of economic transformation and technological change. A robust and efficient system of government expenditures leads to high marginal products of labour and capital to individual firms. This is because of the quality of capital formation that occurs due to good educational and health provision functions of government. Government purchases a portion of private sector outputs with which it uses to provide free public services that is non rival and non excludable. Firms benefit from this as effective source of demand for their goods

framework of operations and this can only be provided by government institutions.

capabilities to motivate innovation instincts to drive technological change.

government based on its non profit and welfare provision disposition.

**4.2 The role of the public sector**

changing needs of the economy.

Robust private sector activities are essential for technological change and economic transformation. It is widely perceived that private sector investments are more effective due to their higher efficiency in utilizing resources. Private sector investments tend to use ideas much more and gain additional ideas through the positive effect of production experience. Knowledge creation is an unintended by-product of investment as such as firms increase the combination of their physical and human capital; they automatically improve their efficiency in production beyond the equivalent levels of the increase in capital. Private sector firms therefore tends to apply technical knowledge in their activities more and therefore are more likely to gain insights from capital goods that enhances production activities in their particular sectors as well as the overall economy through spill over effects.

In their drive to gain large control of markets, firms invest in R&D to improve quality and expand variety of their products. New discoveries of technology by firms through the combination of learning-by-doing and R&D are initially regarded as a private product and they enjoy some degree of preservation that gives them a measure of monopoly power over the discovery with the support of patent rights, in addition to secrecy of methods and codes of the technology. However, over time, competitive firms gain access to the new products from the market and analyse the new knowledge in them and make efforts to replicate or apply the ideas to create their own products with equivalent or even higher level of sophistication.

Increase in a firm's capital stock leads to a parallel increase in its stock of knowledge through learning-by-doing. Each firm's knowledge is assumed to be a public good, so other firms can gain access to it at zero cost. This implies that knowledge spills over onto the entire economy so each firm's discovery of new knowledge (change in technology) impacts on the overall economy. Therefore, a firm's level of technology and by extension, the changes in its technology, is proportional to that of the overall economy.

There are two dimensions of spillover effects of technological change on private firms. The first is sustaining technologies, those that help organizations to make marginal improvements in what they do and requires only gradual change to modify existing systems and products. The second is termed disruptive technologies, those that involve fundamental and at times unexpected technological breakthrough that requires corporations to radically

Technological Change and Economic Transformation 21

complimentarily with a robust household sector that provides effective market and supply labour services. Effective functioning of the public sector in providing essential needs propels the private sector to engage in profitable investments that in turn, motivates the drive for technological change through direct acquisition, learning-by-doing and R&D

Efficacy of regulatory framework, the structure and operations of critical sectors of the economy along with sound macroeconomic management of the economy is essential. Appropriate measures for acquiring technological capabilities should be anchored on domestic value-adding activities based on formidable linkages between a strategic sector with other sectors of the economy driven by innovative transformation of sectors into dynamic systems through adaptation and interaction of factors of production based on co-

The author is grateful to the comments and suggestions of the anonymous reviewer, which has helped improved the contents of the chapter. The contents of the chapter are the responsibility of the author and not his affiliated organization, the Islamic Development

Aghion, P. and Howitt, P. (1998) Endogenous Growth Theory. MIT Press, London, England. Ali, I. and Zhuang, J. (2007): *"Inclusive Growth Toward A Prosperous Asia: Policy Implications"*

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Bosworth, B. et al (1972) The Recent Productivity Slowdown: Comments and Discussions,

Bower, J. and Christensen, C. (1995), "Disruptive Technologies: Catching the Wave",

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**5. Acknowledgments**

rethink their very existence. There is the tendency for large companies to be comfortable with sustaining technologies due to their preoccupation with maintaining markets under their control and aversion to risks of uncertainties associated with disruptive technologies. Apart from the challenge of successful application of the newly "unknown" disruptive technologies, getting consumers to accept the transformed product could threaten market control (Christensen, 1997 and 2003).

Firms that pioneer disruptive technologies do not usually achieve straightforward success in transforming their products and getting the most market attractions and therefore could experience deteriorating performances. However, nurturing the process of applications leads to improvements that make it possible for disruptive technologies to bring substantial benefits to firms in terms of market shares based on positive sentiments of new designs and the perception that it is associated with quality improvements. Products that emerge from disruptive technologies are therefore of limited interests because they don't provide "quick wins" for firms but for those that endure the gradual process of mutation of the technologies into new products, they eventually completely overtake existing products and markets thereby bringing substantial benefits to endured firms.

The comfort of short-term gains from sustaining technologies and averting the risks of uncertainties associated with disruptive technologies on one hand, and the potential substantial gains of the success of nurturing the applications of disruptive technologies on the other, presents a dilemma to firms. To resolve this dilemma, firms will need to acquire separate "spin-off organizations" that are separate from their mainstream operations to nurture the applications of disruptive technologies to eventually reap associated benefits. This strategy provides a basis for accommodating failures from applications of disruptive technologies. (Christensen, 1997 and 2003)

#### **4.4 Key conclusions and insights**

Fostering technological change and economic transformation could address a pertinent intergenerational economic management dilemma; a trade-off between present and future consumption and by extension, welfare. The declining effect of the use of economic resources especially exhaustible natural resources, over time implies that output and consumption will also decline over time. Sustaining a level of output and consumption over a long period to establish intergenerational equity therefore becomes a challenge.

The combined effect of technological change and economic transformation ensures that through inventions, innovations and diffusions, quality of available goods and services are enhanced and new goods and services are created through more efficient production processes. In the context of sustainability for intergenerational prosperity, technological change could ensure non-declining consumption (utility); maintaining (constant) production opportunities over time; non declining natural capital stock; maintaining a steady yield of resource services; stability and resilience of the ecosystem through time and the development of capacity for consensus building.

A key strategy in fostering technological change and economic transformation is significant investments in human capital development through various aspects of education, training for skills acquisition and provision of social support services. This needs to be in tandem with facilitation of large-scale investments that create expansionary effects on the economy complimentarily with a robust household sector that provides effective market and supply labour services. Effective functioning of the public sector in providing essential needs propels the private sector to engage in profitable investments that in turn, motivates the drive for technological change through direct acquisition, learning-by-doing and R&D activities.

Efficacy of regulatory framework, the structure and operations of critical sectors of the economy along with sound macroeconomic management of the economy is essential. Appropriate measures for acquiring technological capabilities should be anchored on domestic value-adding activities based on formidable linkages between a strategic sector with other sectors of the economy driven by innovative transformation of sectors into dynamic systems through adaptation and interaction of factors of production based on coordinated national system of innovation.

#### **5. Acknowledgments**

The author is grateful to the comments and suggestions of the anonymous reviewer, which has helped improved the contents of the chapter. The contents of the chapter are the responsibility of the author and not his affiliated organization, the Islamic Development Bank.

#### **6. References**

20 Technological Change

rethink their very existence. There is the tendency for large companies to be comfortable with sustaining technologies due to their preoccupation with maintaining markets under their control and aversion to risks of uncertainties associated with disruptive technologies. Apart from the challenge of successful application of the newly "unknown" disruptive technologies, getting consumers to accept the transformed product could threaten market

Firms that pioneer disruptive technologies do not usually achieve straightforward success in transforming their products and getting the most market attractions and therefore could experience deteriorating performances. However, nurturing the process of applications leads to improvements that make it possible for disruptive technologies to bring substantial benefits to firms in terms of market shares based on positive sentiments of new designs and the perception that it is associated with quality improvements. Products that emerge from disruptive technologies are therefore of limited interests because they don't provide "quick wins" for firms but for those that endure the gradual process of mutation of the technologies into new products, they eventually completely overtake existing products and markets

The comfort of short-term gains from sustaining technologies and averting the risks of uncertainties associated with disruptive technologies on one hand, and the potential substantial gains of the success of nurturing the applications of disruptive technologies on the other, presents a dilemma to firms. To resolve this dilemma, firms will need to acquire separate "spin-off organizations" that are separate from their mainstream operations to nurture the applications of disruptive technologies to eventually reap associated benefits. This strategy provides a basis for accommodating failures from applications of disruptive

Fostering technological change and economic transformation could address a pertinent intergenerational economic management dilemma; a trade-off between present and future consumption and by extension, welfare. The declining effect of the use of economic resources especially exhaustible natural resources, over time implies that output and consumption will also decline over time. Sustaining a level of output and consumption over

The combined effect of technological change and economic transformation ensures that through inventions, innovations and diffusions, quality of available goods and services are enhanced and new goods and services are created through more efficient production processes. In the context of sustainability for intergenerational prosperity, technological change could ensure non-declining consumption (utility); maintaining (constant) production opportunities over time; non declining natural capital stock; maintaining a steady yield of resource services; stability and resilience of the ecosystem through time and the

A key strategy in fostering technological change and economic transformation is significant investments in human capital development through various aspects of education, training for skills acquisition and provision of social support services. This needs to be in tandem with facilitation of large-scale investments that create expansionary effects on the economy

a long period to establish intergenerational equity therefore becomes a challenge.

control (Christensen, 1997 and 2003).

thereby bringing substantial benefits to endured firms.

technologies. (Christensen, 1997 and 2003)

development of capacity for consensus building.

**4.4 Key conclusions and insights**

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**2**

Tony Smith

*USA*

*Iowa State University*

**The Social Consequences of**

**Technological Change in Capitalist Societies**

No one would dispute that modern capitalist societies have exhibited a historically unprecedented level of technological dynamism. In contrast, assessments of the social consequences of this dynamism diverge widely. It is not possible here to provide a comprehensive overview of competing assessments. I shall first present three important theoretical perspectives on this issue in normative social theory: classical liberalism, liberal egalitarianism, and Marxism. I shall then develop a historical narrative of some of the most significant social consequences of technological change in recent decades. I conclude that a Marxian framework illuminates the role of technical change in shaping the present moment

"Liberalism" is one of the most ambiguous words in our language. It has become one of the strongest terms of opprobrium used by "conservative" advocates of free markets in the United States today against their enemies, despite the fact that they are themselves part of the tradition of classical liberalism beginning with John Locke and Adam Smith.1 For adherents of this tradition individuals are the basic unit of moral concern, and all individuals are asserted to be equally worthy of moral respect. From this *moral equality principle* it follows as a corollary that all individuals should be free to decide for themselves both their life plans and how best to carry them out. Private property rights are an essential component of a social order based on these ideas. Individuals are asserted to have a right to privately appropriate previously unowned things as well as the things they themselves make (either alone or with the aid of others who freely chose to cooperate with them). They also have the fundamental right to freely decide how to use their acquired property, including a right to undertake exchanges should they wish to do so. The exercise of these rights is, of course, subject to the constraint

Classical liberal theorists affirm free markets on the grounds that they institutionalize rights to liberty and property better than any feasible alternative. This rights-based argument is

1 "Classical liberalism," "egalitarian liberalism," and "Marxism" are ideal types. Particular theorists grouped under a particular heading can approach the ideal type in question more or less closely. A fairly pure form of the perspective on the social consequences of technological change in capitalism

of social history better than the competing frameworks considered in this paper.

**2. Classical liberalism and the social consequences of technology**

that the equal rights of others to do the same are acknowledged and respected.

developed in the following paragraphs is found in Hayek, 1976.

**1. Introduction**

## **The Social Consequences of Technological Change in Capitalist Societies**

Tony Smith *Iowa State University USA*

#### **1. Introduction**

24 Technological Change

United Nations Industrial Development Organization (UNIDO, 2009), "Breaking In and

United Nations Industrial Development Organization (UNIDO, 2011), "Industrial Energy

Wolfensohn, J. (2007), "The Four Circles of a Changing World", International Herald

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Young, A. (1991). Learning by Doing and the Dynamic Effects of International Trade.

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16, France

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Tribune, June, quoted in OECD (2010) "Shifting Wealth and the New Geography of Growth" in Perspectives on Global Development 2010: Shifting Wealth, OECD

Performance: A seven country Growth decomposition Study. OECD, Paris Cedex

No one would dispute that modern capitalist societies have exhibited a historically unprecedented level of technological dynamism. In contrast, assessments of the social consequences of this dynamism diverge widely. It is not possible here to provide a comprehensive overview of competing assessments. I shall first present three important theoretical perspectives on this issue in normative social theory: classical liberalism, liberal egalitarianism, and Marxism. I shall then develop a historical narrative of some of the most significant social consequences of technological change in recent decades. I conclude that a Marxian framework illuminates the role of technical change in shaping the present moment of social history better than the competing frameworks considered in this paper.

#### **2. Classical liberalism and the social consequences of technology**

"Liberalism" is one of the most ambiguous words in our language. It has become one of the strongest terms of opprobrium used by "conservative" advocates of free markets in the United States today against their enemies, despite the fact that they are themselves part of the tradition of classical liberalism beginning with John Locke and Adam Smith.1 For adherents of this tradition individuals are the basic unit of moral concern, and all individuals are asserted to be equally worthy of moral respect. From this *moral equality principle* it follows as a corollary that all individuals should be free to decide for themselves both their life plans and how best to carry them out. Private property rights are an essential component of a social order based on these ideas. Individuals are asserted to have a right to privately appropriate previously unowned things as well as the things they themselves make (either alone or with the aid of others who freely chose to cooperate with them). They also have the fundamental right to freely decide how to use their acquired property, including a right to undertake exchanges should they wish to do so. The exercise of these rights is, of course, subject to the constraint that the equal rights of others to do the same are acknowledged and respected.

Classical liberal theorists affirm free markets on the grounds that they institutionalize rights to liberty and property better than any feasible alternative. This rights-based argument is

<sup>1 &</sup>quot;Classical liberalism," "egalitarian liberalism," and "Marxism" are ideal types. Particular theorists grouped under a particular heading can approach the ideal type in question more or less closely. A fairly pure form of the perspective on the social consequences of technological change in capitalism developed in the following paragraphs is found in Hayek, 1976.

The Social Consequences of Technological Change in Capitalist Societies 27

 Restrictions on trade should also be limited in order to enable consumers to enjoy the benefits of innovative imports, and to spur domestic firms to innovate in order to

 Environmental regulations must not be considered prior to a complete and scientifically sound assessment of their costs and benefits. The former must not be understated, or the latter given undue weight, out of nostalgia for a romanticized and unrecoverable past. Further, the extent to which innovations can mitigate problems should not be underestimated; markets, for example, provide powerful incentives both to use costly natural resources more efficiently and to search for technological substitutes. In general, the best way to confront environmental and other difficulties is through market-driven

These arguments can easily be generalized to justify free trade and free capital flows across borders. A regime of global governance eliminating restrictions on foreign trade and investment, encouraging flexible labor markets, and avoiding unsound environmental restrictions, follows as well. If anything, these conclusions have even greater normative force on the global level. Global justice demands that individuals throughout the world have access to the material preconditions for human flourishing. Technological dynamism has proven to be the single most effective means of generating these preconditions. Global justice, classical liberals conclude, therefore demands the adaptation of measures spurring

technological dynamism, and the avoidance of public policies hampering it.

**3.  They question, however, whether free markets, minimal states, and a global regime based on free trade and free flows of capital adequately institutionalize the moral equality principle. John Rawls, perhaps the most influential political philosopher of the twentieth century, insisted that this principle demands a substantial (and not merely formal) equality of basic liberty rights, fair equality of opportunity, and a distribution of income and wealth in which all citizens benefit from economic growth (Rawls, 2001). Rawls and other liberal egalitarians hold that the institutional order defended by classical liberals necessarily tends to generate forms of concentrated economic power and severe inequality that are not consistent with these values. Liberal egalitarians conclude from this that the legitimate functions of the state exceed the more or less minimal set of functions acceptable to classical liberals. Public policies are required to limit concentrations of economic power and severe inequality. More specifically, the work of leading liberal egalitarians clearly implies a defense of technology

For liberal egalitarians the moral equality principle implies a right to participate as an equal in social and political life. Technological change should not have the social consequence of eroding this right. The "creative destruction" of technological change in capitalism threatens to do precisely that. The life prospects of the workers and communities associated with established firms and sectors can be profoundly harmed by the rise of new firms and sectors operating at (or close to) a new scientific-technical frontier. In order to minimize the social harm resulting from technological advances liberal egalitarians call for public policies supporting the transfer of new technologies into threatened communities, the extensive

compete successfully in the world market.

policies beyond those proposed by classical liberals.

innovation.

usually conjoined with claims about the positive consequences of free market economies, with technological dynamism at the top of the list. In these societies producers have a strong incentive to introduce process innovations enabling goods and services to be produced more efficiently, since if they lower unit costs they can lower prices and win market share. There is an equally strong incentive to introduce product innovations that allow purchasers to fulfill existing wants and needs in more satisfactory ways, or to develop new wants and needs in ways they freely choose.

The social consequences of this technological dynamism have profound normative significance within the classical liberal framework. Life plans require goods and services to be carried out. Free markets allow individuals themselves to choose the goods and services that they regard as most important to the fulfillment of their life plans. The drive to product innovations ensures that over time the goods and services that are produced necessarily tend to be those that contribute to freely chosen life plans to the greatest feasible extent. Further, the drive to process innovations ensures that over time that greatest feasible amount of those goods and services will be provided. If human flourishing can be defined as carrying out the lives we have chosen to live to the greatest feasible extent, then technological change in capitalist market societies provides the material preconditions for human flourishing.

Technological change will only have these beneficial social consequences if market competition operates effectively. This in turn requires that economic agents are confident that their property rights will be respected, that they will be able to enter into voluntary contracts providing mutual benefits, and that the terms of these contracts will be adhered to. The main role of the state in the classical liberal framework is to provide a coercive apparatus ensuring that liberty and property rights can be enjoyed in security under "the rule of law."

For libertarians the legitimate functions of the state do not go beyond measures to protect individual citizens against force and fraud. Libertarianism, however, is only one species of classical liberalism. Relatively few advocates of classical liberalism argue against government funding of basic research or basic infrastructure. Many also hold that public resources should be mobilized for training programs to ensure that the workforce possesses needed technical skills. The belief is also widely shared that environmental problems can sometimes be serious enough to warrant regulation of polluting technologies. These sorts of state policies are said to complement free markets, enhancing their technological dynamism beyond what it would otherwise be and ensuring that this dynamism contributes to human flourishing to the greatest feasible extent.

Despite support for such policies, however, there is still an important sense in which even non-libertarian classical liberals defend a "minimal state." This can be seen by considering the technology policies that classical liberalism either excludes completely or accepts to a very limited degree.

usually conjoined with claims about the positive consequences of free market economies, with technological dynamism at the top of the list. In these societies producers have a strong incentive to introduce process innovations enabling goods and services to be produced more efficiently, since if they lower unit costs they can lower prices and win market share. There is an equally strong incentive to introduce product innovations that allow purchasers to fulfill existing wants and needs in more satisfactory ways, or to develop new wants and

The social consequences of this technological dynamism have profound normative significance within the classical liberal framework. Life plans require goods and services to be carried out. Free markets allow individuals themselves to choose the goods and services that they regard as most important to the fulfillment of their life plans. The drive to product innovations ensures that over time the goods and services that are produced necessarily tend to be those that contribute to freely chosen life plans to the greatest feasible extent. Further, the drive to process innovations ensures that over time that greatest feasible amount of those goods and services will be provided. If human flourishing can be defined as carrying out the lives we have chosen to live to the greatest feasible extent, then technological change in capitalist

Technological change will only have these beneficial social consequences if market competition operates effectively. This in turn requires that economic agents are confident that their property rights will be respected, that they will be able to enter into voluntary contracts providing mutual benefits, and that the terms of these contracts will be adhered to. The main role of the state in the classical liberal framework is to provide a coercive apparatus ensuring

For libertarians the legitimate functions of the state do not go beyond measures to protect individual citizens against force and fraud. Libertarianism, however, is only one species of classical liberalism. Relatively few advocates of classical liberalism argue against government funding of basic research or basic infrastructure. Many also hold that public resources should be mobilized for training programs to ensure that the workforce possesses needed technical skills. The belief is also widely shared that environmental problems can sometimes be serious enough to warrant regulation of polluting technologies. These sorts of state policies are said to complement free markets, enhancing their technological dynamism beyond what it would otherwise be and ensuring that this dynamism contributes to human

Despite support for such policies, however, there is still an important sense in which even non-libertarian classical liberals defend a "minimal state." This can be seen by considering the technology policies that classical liberalism either excludes completely or accepts to a

 Capital markets must be able to shift investment funds smoothly and rapidly to new innovative sectors, or to established sectors undertaking significant innovations. Burdensome state regulations of capital markets must be avoided if the positive social

 Labor markets must be flexible so that labor can shift from less innovative sectors and regions to more innovative sectors and regions as smoothly and rapidly as possible.

consequences of technological change are to be enjoyed to the fullest extent.

Here too state regulations impeding flexibility must be avoided.

market societies provides the material preconditions for human flourishing.

that liberty and property rights can be enjoyed in security under "the rule of law."

needs in ways they freely choose.

flourishing to the greatest feasible extent.

very limited degree.

These arguments can easily be generalized to justify free trade and free capital flows across borders. A regime of global governance eliminating restrictions on foreign trade and investment, encouraging flexible labor markets, and avoiding unsound environmental restrictions, follows as well. If anything, these conclusions have even greater normative force on the global level. Global justice demands that individuals throughout the world have access to the material preconditions for human flourishing. Technological dynamism has proven to be the single most effective means of generating these preconditions. Global justice, classical liberals conclude, therefore demands the adaptation of measures spurring technological dynamism, and the avoidance of public policies hampering it.

#### **3.  They question, however, whether free markets, minimal states, and a global regime based on free trade and free flows of capital adequately institutionalize the moral equality principle. John Rawls, perhaps the most influential political philosopher of the twentieth century, insisted that this principle demands a substantial (and not merely formal) equality of basic liberty rights, fair equality of opportunity, and a distribution of income and wealth in which all citizens benefit from economic growth (Rawls, 2001). Rawls and other liberal egalitarians hold that the institutional order defended by classical liberals necessarily tends to generate forms of concentrated economic power and severe inequality that are not consistent with these values. Liberal egalitarians conclude from this that the legitimate functions of the state exceed the more or less minimal set of functions acceptable to classical liberals. Public policies are required to limit concentrations of economic power and severe inequality. More specifically, the work of leading liberal egalitarians clearly implies a defense of technology policies beyond those proposed by classical liberals.

For liberal egalitarians the moral equality principle implies a right to participate as an equal in social and political life. Technological change should not have the social consequence of eroding this right. The "creative destruction" of technological change in capitalism threatens to do precisely that. The life prospects of the workers and communities associated with established firms and sectors can be profoundly harmed by the rise of new firms and sectors operating at (or close to) a new scientific-technical frontier. In order to minimize the social harm resulting from technological advances liberal egalitarians call for public policies supporting the transfer of new technologies into threatened communities, the extensive

The Social Consequences of Technological Change in Capitalist Societies 29

positive social consequences for human flourishing from technological change will be significantly restricted if the financial sector is not subject to effective political regulation.

Another way in which unregulated markets can distort the process of technological innovation brings us back to the notion of creative destruction. Technological change disrupts existing equilibriums. Individual firms and entire industries are threatened with being eradicated by the emergence of new firms and sectors operating close to a new scientific-technical frontier. This gives established incumbents a strong incentive to oppose the rise of new technologies, at least until they have received a minimally satisfactory return on investments in older technologies. If these incumbents possess sufficiently concentrated economic power, the rate of innovation will be significantly less than the socially optimal rate. Effective technology policies by governments can counter-act this danger. Strong antitrust legislation can prevent the stifling of new technological developments by powerful incumbents. State procurements providing a guaranteed market for innovative products can have the same effect. The use of public funds for development projects extending into to the so-called "valley of death" can also determine a rate and path of technological change superior to that which would be selected by markets alone.4 And intellectual property rights regimes must leave ample space for newcomers, rather than act as barriers to entry protecting incumbents from innovators.

The conflict between incumbents and innovators is a major theme of Yoachai Benkler's *The Wealth of Networks*, perhaps the most important recent book examining the social consequences of technological change from a liberal egalitarian perspective*.* Benkler begins by noting that the technologies and forms of social organization of industrial capitalism limited the extent to which core liberal egalitarian values (autonomy, democracy, global

*Autonomy* is a relatively simple matter for classical liberals; one either lacks it (slaves, indentured servants, serfs) or one does not. For liberal egalitarians, in contrast, autonomy can be a matter of degrees. When effective use of the most advanced technologies for producing goods or services requires massive investments in fixed capital, the vast majority of the populace will lack access to the requisite financial resources. They will be able to participate in the process of producing goods and services – and thereby gain access to the monetary resources necessary to support themselves and their dependents—only if those who own fixed capital grant them permission to do so. For Benkler, this need to ask permission to engage in socially productive activity counts as a significant restriction of autonomy. Further, the owners and managers of firms have an overwhelming incentive to obtain a satisfactory return on investment in fixed capital before the technologies embedded in it become obsolete, leading managers to exert control as much control as they can over workers' labor process. This too

In the liberal egalitarian view, the moral equality principle demands that each citizen should have the opportunity to participate as an equal in public life. Open public discourse is seen as the crucial component in the *democratic will formation process* at the heart of a democratic society (Habermas, 1998). In what Benkler terms the industrial information economy, however, public discourse was profoundly restricted. The use of advanced communication

4 The "valley of death" is the metaphorical place where research projects falling between basic research and research foreseen to have immediately commercializable results would otherwise languish

significantly restricts the degree of autonomy enjoyed by the workforce.

justice) could be institutionalized.

(Wessner, 2001).

retraining of workers in those communities, and the provision of benefits sufficiently generous to ensure that affected individuals can continue to participate in social and political life as an equal during the transition period in which a new techno-economic paradigm is diffused.

Liberal egalitarian theorists also regard the standard classical liberal response to environmental harms associated with the use of industrial technologies as inadequate. Markets encourage concern with environmental harms when they take the form of internal costs affecting a firm's bottom line (if a rapidly depleting natural resource increases in price in a way that threatens profits, there is indeed an incentive to undertake a search for a technological substitute). A great number of environmental harms, however, are negative externalities, that is, harms that do not impact a polluting firm's bottom line. In this case market competition does not merely fail to provide an incentive to search for innovations to eliminate or minimize the harm; in so far as this search involves additional costs there is a disincentive for undertaking it. Human flourishing requires a livable environment; that too forms part of the material precondition for being able to live lives of our own choosing. If, liberal egalitarians conclude, we are to ensure that the social consequences of technological change in capitalism are normative acceptable, we must institute far more comprehensive regulation of environmentally harmful technologies than those defended in the classical liberal tradition.

A third point of contention arises from the consideration that in certain circumstances capitalist markets left to themselves will generate a rate of innovation significantly less than what is socially optimal from the standpoint of liberal egalitarianism (that is, less than what would provide the means of human flourishing to the greatest feasible extent). Technological change in a capitalist society ultimately depends upon allocations of financial capital. Classical liberals assume that the financial sector automatically functions as a means for efficiently allocating capital to the most technologically dynamic firms and sectors in the "real economy." As heterodox economists have long understood, this is not necessarily the case. Unless the financial sector is subject to effective political regulation it will tend to treat its own profits as an end in itself, generating self-sustaining speculative bubbles in the process.2 In these circumstances increasing numbers of non-financial firms will be tempted to make profits from ownership of financial assets their ultimate end as well.3 Past a certain point this hampers, rather than aids, technological dynamism (Perez, 2002). Funds that could have gone to investments in innovative products or processes in the "real economy" are diverted to, or remain within, the financial sector. When the speculative bubbles burst, as they always do, the production of goods and services in the "real economy" to meet human wants and needs is further harmed. Liberal egalitarians conclude that the potentially

<sup>2</sup> An inflow of funds into the market for a particular category of financial asset will raise its price. The higher price can then attract a yet higher inflow of funds into that market, raising prices yet further. The increase in (paper) wealth serves as collateral for loans, which can then also be pumped back into that market, raising prices, increasing (paper) wealth, and providing greater collateral for further loans. Human ingenuity will invariably be able to generate myriad reasons why "this time it's different," and the inflation of capital assets is not "irrational exuberance." Just as invariably, these reasons will be mistaken, and the bubble will inevitably burst. In the meantime, however, the profits that can be made from foolishly purchasing a capital asset at an overinflated price, and then selling it to a bigger fool, may greatly exceed that from alternative investments in the "real economy" (Soros, 2009).

<sup>3</sup> For example, retained earnings and borrowings will increasingly be devoted to stock buy-backs that raise the value of shares still outstanding (to the great benefit, we may add, of managers fortunate enough to hold stock options).

retraining of workers in those communities, and the provision of benefits sufficiently generous to ensure that affected individuals can continue to participate in social and political life as an equal during the transition period in which a new techno-economic paradigm is diffused.

Liberal egalitarian theorists also regard the standard classical liberal response to environmental harms associated with the use of industrial technologies as inadequate. Markets encourage concern with environmental harms when they take the form of internal costs affecting a firm's bottom line (if a rapidly depleting natural resource increases in price in a way that threatens profits, there is indeed an incentive to undertake a search for a technological substitute). A great number of environmental harms, however, are negative externalities, that is, harms that do not impact a polluting firm's bottom line. In this case market competition does not merely fail to provide an incentive to search for innovations to eliminate or minimize the harm; in so far as this search involves additional costs there is a disincentive for undertaking it. Human flourishing requires a livable environment; that too forms part of the material precondition for being able to live lives of our own choosing. If, liberal egalitarians conclude, we are to ensure that the social consequences of technological change in capitalism are normative acceptable, we must institute far more comprehensive regulation of environmentally harmful technologies than those defended in the classical liberal tradition.

A third point of contention arises from the consideration that in certain circumstances capitalist markets left to themselves will generate a rate of innovation significantly less than what is socially optimal from the standpoint of liberal egalitarianism (that is, less than what would provide the means of human flourishing to the greatest feasible extent). Technological change in a capitalist society ultimately depends upon allocations of financial capital. Classical liberals assume that the financial sector automatically functions as a means for efficiently allocating capital to the most technologically dynamic firms and sectors in the "real economy." As heterodox economists have long understood, this is not necessarily the case. Unless the financial sector is subject to effective political regulation it will tend to treat its own profits as an end in itself, generating self-sustaining speculative bubbles in the process.2 In these circumstances increasing numbers of non-financial firms will be tempted to make profits from ownership of financial assets their ultimate end as well.3 Past a certain point this hampers, rather than aids, technological dynamism (Perez, 2002). Funds that could have gone to investments in innovative products or processes in the "real economy" are diverted to, or remain within, the financial sector. When the speculative bubbles burst, as they always do, the production of goods and services in the "real economy" to meet human wants and needs is further harmed. Liberal egalitarians conclude that the potentially

2 An inflow of funds into the market for a particular category of financial asset will raise its price. The higher price can then attract a yet higher inflow of funds into that market, raising prices yet further. The increase in (paper) wealth serves as collateral for loans, which can then also be pumped back into that market, raising prices, increasing (paper) wealth, and providing greater collateral for further loans. Human ingenuity will invariably be able to generate myriad reasons why "this time it's different," and the inflation of capital assets is not "irrational exuberance." Just as invariably, these reasons will be mistaken, and the bubble will inevitably burst. In the meantime, however, the profits that can be made from foolishly purchasing a capital asset at an overinflated price, and then selling it to a bigger fool,

3 For example, retained earnings and borrowings will increasingly be devoted to stock buy-backs that raise the value of shares still outstanding (to the great benefit, we may add, of managers fortunate

may greatly exceed that from alternative investments in the "real economy" (Soros, 2009).

enough to hold stock options).

positive social consequences for human flourishing from technological change will be significantly restricted if the financial sector is not subject to effective political regulation.

Another way in which unregulated markets can distort the process of technological innovation brings us back to the notion of creative destruction. Technological change disrupts existing equilibriums. Individual firms and entire industries are threatened with being eradicated by the emergence of new firms and sectors operating close to a new scientific-technical frontier. This gives established incumbents a strong incentive to oppose the rise of new technologies, at least until they have received a minimally satisfactory return on investments in older technologies. If these incumbents possess sufficiently concentrated economic power, the rate of innovation will be significantly less than the socially optimal rate. Effective technology policies by governments can counter-act this danger. Strong antitrust legislation can prevent the stifling of new technological developments by powerful incumbents. State procurements providing a guaranteed market for innovative products can have the same effect. The use of public funds for development projects extending into to the so-called "valley of death" can also determine a rate and path of technological change superior to that which would be selected by markets alone.4 And intellectual property rights regimes must leave ample space for newcomers, rather than act as barriers to entry protecting incumbents from innovators.

The conflict between incumbents and innovators is a major theme of Yoachai Benkler's *The Wealth of Networks*, perhaps the most important recent book examining the social consequences of technological change from a liberal egalitarian perspective*.* Benkler begins by noting that the technologies and forms of social organization of industrial capitalism limited the extent to which core liberal egalitarian values (autonomy, democracy, global justice) could be institutionalized.

*Autonomy* is a relatively simple matter for classical liberals; one either lacks it (slaves, indentured servants, serfs) or one does not. For liberal egalitarians, in contrast, autonomy can be a matter of degrees. When effective use of the most advanced technologies for producing goods or services requires massive investments in fixed capital, the vast majority of the populace will lack access to the requisite financial resources. They will be able to participate in the process of producing goods and services – and thereby gain access to the monetary resources necessary to support themselves and their dependents—only if those who own fixed capital grant them permission to do so. For Benkler, this need to ask permission to engage in socially productive activity counts as a significant restriction of autonomy. Further, the owners and managers of firms have an overwhelming incentive to obtain a satisfactory return on investment in fixed capital before the technologies embedded in it become obsolete, leading managers to exert control as much control as they can over workers' labor process. This too significantly restricts the degree of autonomy enjoyed by the workforce.

In the liberal egalitarian view, the moral equality principle demands that each citizen should have the opportunity to participate as an equal in public life. Open public discourse is seen as the crucial component in the *democratic will formation process* at the heart of a democratic society (Habermas, 1998). In what Benkler terms the industrial information economy, however, public discourse was profoundly restricted. The use of advanced communication

<sup>4</sup> The "valley of death" is the metaphorical place where research projects falling between basic research and research foreseen to have immediately commercializable results would otherwise languish (Wessner, 2001).

The Social Consequences of Technological Change in Capitalist Societies 31

Unlike the technologies of the industrial age, important means of production today (computers and internet connections especially) are now widely affordable, thanks to the incredibly steep upward slope of the trajectory of information technologies.6 As a result, an ever-increasing number of individual agents are now able to own relatively advanced means of production themselves. Those who choose to develop the required expertise now have the power to decide for themselves what projects they wish to work on and with whom they wish to co-operate. By definition this expansion in the scope of free choice counts as an expansion of autonomy. Information technologies also enable a "many to many" model of communication to replace the "one to many" model of the mass media technologies of the industrial information age. This allows a tremendous expansion of the issues that can become subjects of public discourse. Democratic will-formation processes are furthered as the systematic limitations imposed by private ownership of the means of social communication are overcome. Finally, commons-based peer production greatly expands the ability of researchers with the time and expertise to collaborate effectively in developing drugs addressing the needs of those suffering from particular ailments, and seeds for farmers facing particular challenges, even if those helped by these technological products lack sufficient purchasing power to be of interest to pharmaceutical or agribusiness firms. This too clearly counts as a normative

advance from the standpoint of the moral equality principle according to Benkler.

intellectual property rights in order to maintain their rents (Woo, 2010).

about events across the globe, and so on.

dollar invested doubles every eighteen months.

Benkler is not a technological determinist; the fact that a new mode of production is technologically possible does not imply that it will automatically emerge and grow. Commons-based peer production threatens powerful incumbents, such as media conglomerates. Incumbents can be expected to use their immense resources to push technology policies in a direction serving their interests, stifling the development of this new mode of production, thereby preventing the social consequences of contemporary technologies from being as positive as they could be. Commons-based peer production, for example, both requires free knowledge goods as inputs and produces free knowledge goods as outputs. The more knowledge goods are treated by the legal system as free public goods, the more commons-based peer production can flourish. But the more the intellectual property rights regime is extended in response to the political pressure of incumbents, the more difficult it will be for this new mode of production to mature. Liberal egalitarians, Benkler concludes, cannot be indifferent to technology policy debates. A commitment to the moral equality principle requires a political commitment to struggle against the agenda of those wishing to extend

Liberal egalitarians are not romantics longing for a pre-modern world with little technological dynamism. They instead call for a social world in which the consequences of technological dynamism are consistent with the moral equality principle to the greatest feasible extent. In the absence of states and regimes of global governance implementing technology policies consistent with liberal egalitarian values, technological change in capitalism will necessarily tend to generate economic inequalities exceeding what is consistent with a substantive equality of civil and political liberties, a fair equality of

capitalist firms have also collectively produced encyclopedias that have proven useful to millions, entirely new genres of music, unprecedented access to diverse sources of information and commentary

6 The shape of this trajectory is captured in "Moore's Law," according to which computing power per

technologies required massive investment in fixed capital, and here too the vast majority of the populace lacked access to the requisite funds. Concentrated private ownership of the technological means for circulating information distorts the process of democratic will formation in two ways. First, the private owners of the means of communication have a disproportionate ability to shape public opinion, both through the content they choose to transmit (or not transmit, as the case may be) and through the manner in which this content is presented. The second difficulty is perhaps even more important. In capitalism privately owned mass media requires a mass audience to attract advertising revenue. Suppose there are three different issues a newspaper could cover, or three different programs a television station could run, the first of great interest to a large minority, the second of great interest to a different large minority, and the third of mild interest to a vast majority. The third will tend to be selected for distribution through the mass media technologies of industrialized capitalism. This counts as a systematic restriction of public discourse (Benkler, 2006, 204-11).

A third example of a tension between technological development and liberal egalitarian values concerns *global justice*. The areas of greatest market demand are not necessarily the areas of the greatest social need. Imagine two health aliments. One is a relatively minor condition that afflicts a number of affluent people in wealthy regions of the globe; the other a serious and potentially deadly affliction affecting far more people in poor regions, few of whom with significant disposable income. When pharmaceutical companies allocate investment to research proposals, priority will be given to research proposes aimed at developing drugs to address the former condition (Kremer, 2002). Similarly, research in agricultural technologies will be systematically biased in favor of innovations designed to improve the condition of affluent farmers, neglecting research on crops grown by producers in underdeveloped countries. Here too a strong case can be made that the social benefits per dollar invested would be much greater if research designed to aid those lacking purchasing power were given more priority.

Benkler is well aware that anti-trust legislation, labor regulations, publicly owned mass media, government laboratories researching medical drugs and agricultural technologies, and other familiar public policies supported by liberal egalitarians, can lessen the extent to which the technologies of industrial capitalism are associated with these negative social consequences. But he also holds that these negative consequences could not have been avoided in the past without having to sacrifice many of the benefits of liberal capitalist societies—which, all in all, have still advanced the normative values of autonomy, democratic will formation, and the fulfillment of the important social priorities better than any alternative social formation in history. Today, however, technological developments are setting the stage for the new mode of production he terms "commons-based peer production."5 These developments have the potential to generate a quite different set of social consequences than those associated with industrial technologies.

<sup>5</sup> The contemporary significance of commons-based peer production should not be underestimated: "Ideas like free Web-based e-mail, hosting services for personal Web pages, instant messenger software, social networking sites, and well-designed search engines emerged more from individuals or small groups of people wanting to solve their own problems or try something neat than from firms realizing there were profits to be gleaned" (Zittrain, 2008, 85). Encryption software, peer-to-peer file-sharing software, sound and image editors, and many other examples can be added to this list. "Indeed, it is difficult to find software *not* initiated by amateurs" (Zittrain, 2008, 89). Individuals cooperating outside

technologies required massive investment in fixed capital, and here too the vast majority of the populace lacked access to the requisite funds. Concentrated private ownership of the technological means for circulating information distorts the process of democratic will formation in two ways. First, the private owners of the means of communication have a disproportionate ability to shape public opinion, both through the content they choose to transmit (or not transmit, as the case may be) and through the manner in which this content is presented. The second difficulty is perhaps even more important. In capitalism privately owned mass media requires a mass audience to attract advertising revenue. Suppose there are three different issues a newspaper could cover, or three different programs a television station could run, the first of great interest to a large minority, the second of great interest to a different large minority, and the third of mild interest to a vast majority. The third will tend to be selected for distribution through the mass media technologies of industrialized capitalism. This counts as a systematic restriction of public discourse (Benkler, 2006, 204-11). A third example of a tension between technological development and liberal egalitarian values concerns *global justice*. The areas of greatest market demand are not necessarily the areas of the greatest social need. Imagine two health aliments. One is a relatively minor condition that afflicts a number of affluent people in wealthy regions of the globe; the other a serious and potentially deadly affliction affecting far more people in poor regions, few of whom with significant disposable income. When pharmaceutical companies allocate investment to research proposals, priority will be given to research proposes aimed at developing drugs to address the former condition (Kremer, 2002). Similarly, research in agricultural technologies will be systematically biased in favor of innovations designed to improve the condition of affluent farmers, neglecting research on crops grown by producers in underdeveloped countries. Here too a strong case can be made that the social benefits per dollar invested would be much greater if research designed to aid those lacking purchasing

Benkler is well aware that anti-trust legislation, labor regulations, publicly owned mass media, government laboratories researching medical drugs and agricultural technologies, and other familiar public policies supported by liberal egalitarians, can lessen the extent to which the technologies of industrial capitalism are associated with these negative social consequences. But he also holds that these negative consequences could not have been avoided in the past without having to sacrifice many of the benefits of liberal capitalist societies—which, all in all, have still advanced the normative values of autonomy, democratic will formation, and the fulfillment of the important social priorities better than any alternative social formation in history. Today, however, technological developments are setting the stage for the new mode of production he terms "commons-based peer production."5 These developments have the potential to generate a quite different set of

5 The contemporary significance of commons-based peer production should not be underestimated: "Ideas like free Web-based e-mail, hosting services for personal Web pages, instant messenger software, social networking sites, and well-designed search engines emerged more from individuals or small groups of people wanting to solve their own problems or try something neat than from firms realizing there were profits to be gleaned" (Zittrain, 2008, 85). Encryption software, peer-to-peer file-sharing software, sound and image editors, and many other examples can be added to this list. "Indeed, it is difficult to find software *not* initiated by amateurs" (Zittrain, 2008, 89). Individuals cooperating outside

social consequences than those associated with industrial technologies.

power were given more priority.

Unlike the technologies of the industrial age, important means of production today (computers and internet connections especially) are now widely affordable, thanks to the incredibly steep upward slope of the trajectory of information technologies.6 As a result, an ever-increasing number of individual agents are now able to own relatively advanced means of production themselves. Those who choose to develop the required expertise now have the power to decide for themselves what projects they wish to work on and with whom they wish to co-operate. By definition this expansion in the scope of free choice counts as an expansion of autonomy. Information technologies also enable a "many to many" model of communication to replace the "one to many" model of the mass media technologies of the industrial information age. This allows a tremendous expansion of the issues that can become subjects of public discourse. Democratic will-formation processes are furthered as the systematic limitations imposed by private ownership of the means of social communication are overcome. Finally, commons-based peer production greatly expands the ability of researchers with the time and expertise to collaborate effectively in developing drugs addressing the needs of those suffering from particular ailments, and seeds for farmers facing particular challenges, even if those helped by these technological products lack sufficient purchasing power to be of interest to pharmaceutical or agribusiness firms. This too clearly counts as a normative advance from the standpoint of the moral equality principle according to Benkler.

Benkler is not a technological determinist; the fact that a new mode of production is technologically possible does not imply that it will automatically emerge and grow. Commons-based peer production threatens powerful incumbents, such as media conglomerates. Incumbents can be expected to use their immense resources to push technology policies in a direction serving their interests, stifling the development of this new mode of production, thereby preventing the social consequences of contemporary technologies from being as positive as they could be. Commons-based peer production, for example, both requires free knowledge goods as inputs and produces free knowledge goods as outputs. The more knowledge goods are treated by the legal system as free public goods, the more commons-based peer production can flourish. But the more the intellectual property rights regime is extended in response to the political pressure of incumbents, the more difficult it will be for this new mode of production to mature. Liberal egalitarians, Benkler concludes, cannot be indifferent to technology policy debates. A commitment to the moral equality principle requires a political commitment to struggle against the agenda of those wishing to extend intellectual property rights in order to maintain their rents (Woo, 2010).

Liberal egalitarians are not romantics longing for a pre-modern world with little technological dynamism. They instead call for a social world in which the consequences of technological dynamism are consistent with the moral equality principle to the greatest feasible extent. In the absence of states and regimes of global governance implementing technology policies consistent with liberal egalitarian values, technological change in capitalism will necessarily tend to generate economic inequalities exceeding what is consistent with a substantive equality of civil and political liberties, a fair equality of

capitalist firms have also collectively produced encyclopedias that have proven useful to millions, entirely new genres of music, unprecedented access to diverse sources of information and commentary about events across the globe, and so on.

<sup>6</sup> The shape of this trajectory is captured in "Moore's Law," according to which computing power per dollar invested doubles every eighteen months.

The Social Consequences of Technological Change in Capitalist Societies 33

required to implement their life plans. In a society of generalized commodity exchange, however, obtaining those goods and services requires monetary resources, and this generally requires some sort of association (whether as an investor, a creditor, a wage worker, or a pensioner) with a unit of production that successfully aims at the "unceasing movement of profit-making … [t]he ceaseless augmentation of value." Marx concludes from these considerations that the *valorization principle* is an organizing principle of social life on the level of society as a whole. Money is not a mere means adopted for the convenience of

If this is correct, then the valorization principle must also be seen as the organizing principle of technological change. Technology cannot simply be seen as a means of furthering human flourishing; in a capitalist society technology is first and foremost a means to capital accumulation. Human ends are, of course, furthered by technological change. But they necessarily tend to be furthered if and only if doing so furthers (or is at least compatible

Marx derived a set of structural tendencies regarding technological change from this starting point (Smith, 1997, 2010). The beginning of Volume 1 of *Capital* shows the need for producers to continually seek product innovations, lest their privately undertaken production turn out to have been socially wasted when competitors introduce products desired more by consumers. In Volume 2 Marx explains why advances in transportation and communication technologies necessarily tend to be sought in capitalism: they allow units of capital to complete circuits of investment, production, and sale at a faster rate, enabling more capital to be accumulated in a given period of time (Smith, 1998). Volume 3 explores how the valorization imperative is manifested in the drive to introduce innovations lowering the costs of raw materials, machinery, plants, and infrastructure. Volume 3 also sketches how technologies speeding and extending the scale of sales to consumers aid the valorization process, as do communication technologies speeding financial transactions and expanding the geographical range from which financial centers appropriate savings and to

Throughout all three Volumes Marx remarks on the threat technological development in capitalism poses to the environment. In Marx's discussion the fundamental problem stems from the discordant temporalities of capitalism and the environment of which human life is but a part. A productivity advance of, say, twenty percent, could be used to produce the same level of output in twenty percent less time. Or it could lead to the production of a twenty percent greater output in the same time. In capitalism the latter option necessarily tends to be selected, since competition among units of capital imposes the imperative to accumulate as much capital as possible as fast as possible, and this goal is generally advanced by producing and selling more commodities. Past a certain point this accelerated temporality will come into tension with the temporality of ecosystems: the capitalist economy tends to extract natural resources at a faster rate ecosystems can reproduce them, and engender wastes at a faster rate than ecosystems can absorb them. This state of affairs can continue for an extended period of time without serious difficulties arising, and technological fixes (such as the creation of substitutes for exhausted natural resources, the discovery of technical processes that use fewer natural resources, or generate less waste, or process wastes into non-harmful or even useable substances, and so on), can extend this period. Nonetheless, the underlying tension remains. For Marx, the probability that a society

human agents; the accumulation of money capital is an end in itself.

with) the end of capital accumulation.

which they can transmit credit and investments.

opportunity, and a wide diffusion of the benefits of technological advances. To a considerable extent, then, the debate between classical liberalism and liberal egalitarianism is a debate about the social consequences of technological change in capitalism.

#### **4. The Marxian analysis of technology and social change in capitalism**

For Marx too there is a sense in which the individual is the fundamental unit of moral concern. His notion of "the social individual" is different from the concept of the atomistic individual found in many writings in the classical liberal tradition. But it is not so different in principle from the conception held by liberal egalitarian theorists, who echo Marx's call for "a society in which the full and free development of every individual forms the ruling principle," and in which "the free development of each is the condition for the free development of all" (Marx, 1976, 739; Marx and Engels, 1976, 506). Further, Marx does not deny that the technological dynamism of capitalism has provided the material preconditions for human flourishing to an unprecedented extent. First-time readers are often surprised by the depth of Marx's appreciation of capitalism's technological dynamism:

The bourgeoisie, during its rule of scarce one hundred years, has created more massive and more colossal productive forces than have all preceding generations together. Subjection of Nature's forces to man, machinery, application of chemistry to industry and agriculture, steam-navigation, railways, electric telegraphs, clearing of whole continents for cultivation, canalisation of rivers, whole populations conjured out of the ground—what earlier century had even a presentiment that such productive forces slumbered in the lap of social labour? (Marx and Engels, 1976, 489).

He also agrees with the liberal egalitarian claim that in the classical liberal model the social benefits of technological dynamism are profoundly restricted. For Marx, however, the problem goes deeper than the failure to provide effective political regulation of markets. From the Marxist point of view liberal egalitarianism, no less than classical liberalism, overlooks the fundamental inversion of ends and means at the very heart of capitalism.

No one disputes that economic agents often make the acquisition of money their goal. But classical liberals and liberal egalitarians both consider money a merely proximate (short-tomedium term) end. For members of both groups money is inherently a means to make exchange more efficient and convenient, thereby serving the ultimate end of providing men and women with the goods and services they require to meet their wants and needs. The disagreement between defenders of the two viewpoints centers on whether money automatically furthers this end in forms of capitalism with only a "minimal" state and regime of global governance, or whether the more extensive state and global regime defended by liberal egalitarians is required. However, Marx asserts, in a capitalist society "use-values must never be treated as the immediate aim … [The] aim is rather the unceasing movement of profit-making … [t]he ceaseless augmentation of value" (Marx, 1976, 254). In a society of generalized commodity production and exchange, most units of production necessarily must make the attainment of a M' exceeding initial investment (M) their overarching goal. If they do not, over time they are increasingly likely to be pushed to the margins of social life (if not forced out of operation altogether) by units of production that do systematically make the appropriation of surplus value (the difference between M' and M) their overarching end. Most individual agents simply seek the material resources

opportunity, and a wide diffusion of the benefits of technological advances. To a considerable extent, then, the debate between classical liberalism and liberal egalitarianism

For Marx too there is a sense in which the individual is the fundamental unit of moral concern. His notion of "the social individual" is different from the concept of the atomistic individual found in many writings in the classical liberal tradition. But it is not so different in principle from the conception held by liberal egalitarian theorists, who echo Marx's call for "a society in which the full and free development of every individual forms the ruling principle," and in which "the free development of each is the condition for the free development of all" (Marx, 1976, 739; Marx and Engels, 1976, 506). Further, Marx does not deny that the technological dynamism of capitalism has provided the material preconditions for human flourishing to an unprecedented extent. First-time readers are often surprised by

The bourgeoisie, during its rule of scarce one hundred years, has created more massive and more colossal productive forces than have all preceding generations together. Subjection of Nature's forces to man, machinery, application of chemistry to industry and agriculture, steam-navigation, railways, electric telegraphs, clearing of whole continents for cultivation, canalisation of rivers, whole populations conjured out of the ground—what earlier century had even a presentiment that such productive forces

He also agrees with the liberal egalitarian claim that in the classical liberal model the social benefits of technological dynamism are profoundly restricted. For Marx, however, the problem goes deeper than the failure to provide effective political regulation of markets. From the Marxist point of view liberal egalitarianism, no less than classical liberalism, overlooks the fundamental inversion of ends and means at the very heart of capitalism.

No one disputes that economic agents often make the acquisition of money their goal. But classical liberals and liberal egalitarians both consider money a merely proximate (short-tomedium term) end. For members of both groups money is inherently a means to make exchange more efficient and convenient, thereby serving the ultimate end of providing men and women with the goods and services they require to meet their wants and needs. The disagreement between defenders of the two viewpoints centers on whether money automatically furthers this end in forms of capitalism with only a "minimal" state and regime of global governance, or whether the more extensive state and global regime defended by liberal egalitarians is required. However, Marx asserts, in a capitalist society "use-values must never be treated as the immediate aim … [The] aim is rather the unceasing movement of profit-making … [t]he ceaseless augmentation of value" (Marx, 1976, 254). In a society of generalized commodity production and exchange, most units of production necessarily must make the attainment of a M' exceeding initial investment (M) their overarching goal. If they do not, over time they are increasingly likely to be pushed to the margins of social life (if not forced out of operation altogether) by units of production that do systematically make the appropriation of surplus value (the difference between M' and M) their overarching end. Most individual agents simply seek the material resources

is a debate about the social consequences of technological change in capitalism.

the depth of Marx's appreciation of capitalism's technological dynamism:

slumbered in the lap of social labour? (Marx and Engels, 1976, 489).

**4. The Marxian analysis of technology and social change in capitalism**

required to implement their life plans. In a society of generalized commodity exchange, however, obtaining those goods and services requires monetary resources, and this generally requires some sort of association (whether as an investor, a creditor, a wage worker, or a pensioner) with a unit of production that successfully aims at the "unceasing movement of profit-making … [t]he ceaseless augmentation of value." Marx concludes from these considerations that the *valorization principle* is an organizing principle of social life on the level of society as a whole. Money is not a mere means adopted for the convenience of human agents; the accumulation of money capital is an end in itself.

If this is correct, then the valorization principle must also be seen as the organizing principle of technological change. Technology cannot simply be seen as a means of furthering human flourishing; in a capitalist society technology is first and foremost a means to capital accumulation. Human ends are, of course, furthered by technological change. But they necessarily tend to be furthered if and only if doing so furthers (or is at least compatible with) the end of capital accumulation.

Marx derived a set of structural tendencies regarding technological change from this starting point (Smith, 1997, 2010). The beginning of Volume 1 of *Capital* shows the need for producers to continually seek product innovations, lest their privately undertaken production turn out to have been socially wasted when competitors introduce products desired more by consumers. In Volume 2 Marx explains why advances in transportation and communication technologies necessarily tend to be sought in capitalism: they allow units of capital to complete circuits of investment, production, and sale at a faster rate, enabling more capital to be accumulated in a given period of time (Smith, 1998). Volume 3 explores how the valorization imperative is manifested in the drive to introduce innovations lowering the costs of raw materials, machinery, plants, and infrastructure. Volume 3 also sketches how technologies speeding and extending the scale of sales to consumers aid the valorization process, as do communication technologies speeding financial transactions and expanding the geographical range from which financial centers appropriate savings and to which they can transmit credit and investments.

Throughout all three Volumes Marx remarks on the threat technological development in capitalism poses to the environment. In Marx's discussion the fundamental problem stems from the discordant temporalities of capitalism and the environment of which human life is but a part. A productivity advance of, say, twenty percent, could be used to produce the same level of output in twenty percent less time. Or it could lead to the production of a twenty percent greater output in the same time. In capitalism the latter option necessarily tends to be selected, since competition among units of capital imposes the imperative to accumulate as much capital as possible as fast as possible, and this goal is generally advanced by producing and selling more commodities. Past a certain point this accelerated temporality will come into tension with the temporality of ecosystems: the capitalist economy tends to extract natural resources at a faster rate ecosystems can reproduce them, and engender wastes at a faster rate than ecosystems can absorb them. This state of affairs can continue for an extended period of time without serious difficulties arising, and technological fixes (such as the creation of substitutes for exhausted natural resources, the discovery of technical processes that use fewer natural resources, or generate less waste, or process wastes into non-harmful or even useable substances, and so on), can extend this period. Nonetheless, the underlying tension remains. For Marx, the probability that a society

The Social Consequences of Technological Change in Capitalist Societies 35

tend to reinforce the structural coercion and exploitation at the heart of the capital/wage

A final point regarding the workplace to be mentioned here refers again to productivity advances associated with technological change. As we saw above, the "default setting" in capitalism is for this advance to be used to increase output without sufficient regard for long-term environmental impacts. This use of technologies is also correlated with an intensification (and often extension) of the workday, despite the fact that gains in productivity could in principle be used to reduce labor time with no loss of livelihood or living standards. Marx wrote, "Since all *free time* is time for free development, the capitalist usurps the *free time* created by workers for society" (Marx, 1987, 22). Marx thought that from a world historical perspective this was the ultimately the single greatest way in which

There is one final issue to be considered in this survey of Marx's account of the social consequences following technological change in capitalism. Marx argued that the very investments in technological change intended to further capital accumulation tend to undercut the accumulation process. New plants and firms will enter a sector when investments in fixed capital embodying more advanced technologies promise to generate above average profits due to higher levels of efficiency or products of superior quality. But as they do so, established firms do not automatically withdraw at a rate that would maintain an equilibrium of supply and demand. While the very weakest will go under, others will be content to obtain an average (or perhaps even below average) rate of profit on their circulating capital (raw materials, labor costs, etc.). There are a variety of reasons why this is a rational course for them to take. These units of production have already made the fixed capital investments (machinery, buildings, and so on) that allow profits to be won from circulating capital; if they walk away these investments will be wasted. Further, the management and work force of these firms have sector-specific skills that likely would be difficult to duplicate in any reasonable time period were the firms to shift operations to a different sector. They will also have established relationships with suppliers and distributors operating in the given sector that would be difficult and costly to establish elsewhere. They may also have relations with local governments and universities that provide important support (infrastructure, research, etc.), support they might not enjoy if they were to shift operations to a different sector. There is, finally, the hope that if they hold on they may be able at some later time to make investments in advanced technologies and leap-frog over their competitors. While these actions are rational from the standpoint of individual units of capital, they can have a collectively irrational result: the rate of profit in the sector as a whole tends to decline as the lower profits of older firms in the sector outweigh the above average profits appropriated by a relatively few newcomers (Reuten, 1991). When this dynamic occurs simultaneously in a number of key sectors, Marxists speak of an *overaccumulation crisis.* One of the most important theses of the Marxian theory of technological change is that the technological dynamism of capitalism necessarily tends to

The contrast between the Marxian perspective on the social consequences of technological change in capitalism and the classical liberal and liberal egalitarian viewpoints is complex. Marx actually agrees that the technological dynamism of capitalism furthers the prevision of the material preconditions for human flourishing more than any previous form of social organization. But he did not agree that technological change in an institutional context of so-

technological change in capitalism hampers human flourishing.

labor relation.

generate such crises.

whose main organizing principle is "Grow or die!" (or, more exactly, "Ceaselessly augment value!") will generate environmental crises approaches one (Harvey, 1996, Part Two).

The dimension of technology and social change for which Marx is best known has to do with the labor process in the capitalist workplace. Marx thought that the pernicious effects of the valorization imperative for the satisfaction of human ends are most apparent in the capital/wage labor relation. Wage laborers are required to perform surplus labor beyond that producing an amount of value equivalent to their wages. Insofar as technologies in the workplace reduce the latter period of time, they extend the former:

Like every other instrument for increasing the productivity of labour, machinery is intended to cheapen commodities and, by shortening the part of the working day in which the worker works for himself, to lengthen the other part, the part he gives to the capitalist for nothing. The machine is a means for producing surplus-value (Marx, 1976, 492).

Under these conditions the scientific-technological knowledge embodied in machinery is experienced by individual workers as an "alien force":

In no respect does the machine appear as the means of labour of the individual worker … (T)he machine, which possesses skill and power in contrast to the worker, is itself the virtuoso … Science, which compels the inanimate members of the machinery, by means of their design, to operate purposefully as an automaton, does not exist in the worker's consciousness, but acts upon him through the machine as an alien force, as the force of the machine itself (Marx, 1987, 82-3).

Collective organization can overcome an individual worker's sense of powerlessness. But collective organization is difficult to maintain if the workforce is divided, and technological change can be used to foster such divisions: technologically-induced unemployment can set those desperate for work against those desperate to retain their jobs (Marx, 1976, Chapter 25), while communication and transportation technologies make the threat of shifting investment from one group of workers to another more effective. Technologies that deskill those enjoying relatively high levels of remuneration and control over their labor process also shift the balance in power between capital and labor in favour of the former (Marx 1976, 549). Technologies undercutting the effectiveness of strikes warrant mention as well:

[M]achinery does not just act as a superior competitor to the worker, always on the point of making him superfluous. It is a power inimical to him … It is the most powerful weapon for suppressing strikes, those periodic revolts of the working class against the autocracy of capital … It would be possible to write a whole history of the inventions made since 1830 for the sole purpose of providing capital with weapons against working-class revolt (Marx, 1976, 562-3).

It is important to stress that the social consequences of technological innovation are indeterminate in particular cases. Labor history shows that the very technologies introduced to divide the work-force, deskill certain categories of workers, or break strikes, may in other contexts contribute to worker unity, enhance the skills of different workers, and help labor struggles succeed. Nonetheless, ownership and control of capital grants its holders the "operational autonomy" to initiate and direct the innovation process in the workplace (Feenberg, 2010). As long as this power is in place, Marx thought, technological change will

whose main organizing principle is "Grow or die!" (or, more exactly, "Ceaselessly augment value!") will generate environmental crises approaches one (Harvey, 1996, Part Two).

The dimension of technology and social change for which Marx is best known has to do with the labor process in the capitalist workplace. Marx thought that the pernicious effects of the valorization imperative for the satisfaction of human ends are most apparent in the capital/wage labor relation. Wage laborers are required to perform surplus labor beyond that producing an amount of value equivalent to their wages. Insofar as technologies in the

Like every other instrument for increasing the productivity of labour, machinery is intended to cheapen commodities and, by shortening the part of the working day in which the worker works for himself, to lengthen the other part, the part he gives to the capitalist for nothing. The machine is a means for producing surplus-value (Marx, 1976,

Under these conditions the scientific-technological knowledge embodied in machinery is

Collective organization can overcome an individual worker's sense of powerlessness. But collective organization is difficult to maintain if the workforce is divided, and technological change can be used to foster such divisions: technologically-induced unemployment can set those desperate for work against those desperate to retain their jobs (Marx, 1976, Chapter 25), while communication and transportation technologies make the threat of shifting investment from one group of workers to another more effective. Technologies that deskill those enjoying relatively high levels of remuneration and control over their labor process also shift the balance in power between capital and labor in favour of the former (Marx 1976,

549). Technologies undercutting the effectiveness of strikes warrant mention as well:

[M]achinery does not just act as a superior competitor to the worker, always on the point of making him superfluous. It is a power inimical to him … It is the most powerful weapon for suppressing strikes, those periodic revolts of the working class against the autocracy of capital … It would be possible to write a whole history of the inventions made since 1830 for the sole purpose of providing capital with weapons

It is important to stress that the social consequences of technological innovation are indeterminate in particular cases. Labor history shows that the very technologies introduced to divide the work-force, deskill certain categories of workers, or break strikes, may in other contexts contribute to worker unity, enhance the skills of different workers, and help labor struggles succeed. Nonetheless, ownership and control of capital grants its holders the "operational autonomy" to initiate and direct the innovation process in the workplace (Feenberg, 2010). As long as this power is in place, Marx thought, technological change will

In no respect does the machine appear as the means of labour of the individual worker … (T)he machine, which possesses skill and power in contrast to the worker, is itself the virtuoso … Science, which compels the inanimate members of the machinery, by means of their design, to operate purposefully as an automaton, does not exist in the worker's consciousness, but acts upon him through the machine as an alien force, as the force of

workplace reduce the latter period of time, they extend the former:

experienced by individual workers as an "alien force":

against working-class revolt (Marx, 1976, 562-3).

the machine itself (Marx, 1987, 82-3).

492).

tend to reinforce the structural coercion and exploitation at the heart of the capital/wage labor relation.

A final point regarding the workplace to be mentioned here refers again to productivity advances associated with technological change. As we saw above, the "default setting" in capitalism is for this advance to be used to increase output without sufficient regard for long-term environmental impacts. This use of technologies is also correlated with an intensification (and often extension) of the workday, despite the fact that gains in productivity could in principle be used to reduce labor time with no loss of livelihood or living standards. Marx wrote, "Since all *free time* is time for free development, the capitalist usurps the *free time* created by workers for society" (Marx, 1987, 22). Marx thought that from a world historical perspective this was the ultimately the single greatest way in which technological change in capitalism hampers human flourishing.

There is one final issue to be considered in this survey of Marx's account of the social consequences following technological change in capitalism. Marx argued that the very investments in technological change intended to further capital accumulation tend to undercut the accumulation process. New plants and firms will enter a sector when investments in fixed capital embodying more advanced technologies promise to generate above average profits due to higher levels of efficiency or products of superior quality. But as they do so, established firms do not automatically withdraw at a rate that would maintain an equilibrium of supply and demand. While the very weakest will go under, others will be content to obtain an average (or perhaps even below average) rate of profit on their circulating capital (raw materials, labor costs, etc.). There are a variety of reasons why this is a rational course for them to take. These units of production have already made the fixed capital investments (machinery, buildings, and so on) that allow profits to be won from circulating capital; if they walk away these investments will be wasted. Further, the management and work force of these firms have sector-specific skills that likely would be difficult to duplicate in any reasonable time period were the firms to shift operations to a different sector. They will also have established relationships with suppliers and distributors operating in the given sector that would be difficult and costly to establish elsewhere. They may also have relations with local governments and universities that provide important support (infrastructure, research, etc.), support they might not enjoy if they were to shift operations to a different sector. There is, finally, the hope that if they hold on they may be able at some later time to make investments in advanced technologies and leap-frog over their competitors. While these actions are rational from the standpoint of individual units of capital, they can have a collectively irrational result: the rate of profit in the sector as a whole tends to decline as the lower profits of older firms in the sector outweigh the above average profits appropriated by a relatively few newcomers (Reuten, 1991). When this dynamic occurs simultaneously in a number of key sectors, Marxists speak of an *overaccumulation crisis.* One of the most important theses of the Marxian theory of technological change is that the technological dynamism of capitalism necessarily tends to generate such crises.

The contrast between the Marxian perspective on the social consequences of technological change in capitalism and the classical liberal and liberal egalitarian viewpoints is complex. Marx actually agrees that the technological dynamism of capitalism furthers the prevision of the material preconditions for human flourishing more than any previous form of social organization. But he did not agree that technological change in an institutional context of so-

The Social Consequences of Technological Change in Capitalist Societies 37

must write off many of their foolish loans (their failure to do this has brought the Eurozone project into question). Most importantly, lending and borrowing institutions throughout the

In the view defended here, the roots of the 2008 financial crisis can be found in the global slowdown of the 1970s after a quarter century of exceptionally high rates of investment, growth, and profits. The causes of this slowdown were varied and complex. *However, one essential element was undoubtedly the technological dynamism of Japanese and European (predominately German) producers*. In 1945 the Japanese economy was roughly a century behind the U.S., while Germany lagged a half century or so. By the 70s both had more than caught up. In many of the most technologically sophisticated sectors of the world market (consumer electronics, autos, motorcycles, chemicals, business machines, steel, and so on), these firms produced higher quality products much more efficiently than their U.S. competitors. U.S. producers in these sectors did not shut down as Japanese and German companies added to productive capacity in the global economy, and over time the rate of growth of productive capacity increased faster than the rate of growth of markets to absorb it. The result of this technological development was an overaccumulation of capital, manifested in excess productive capacity in all the leading sectors of the world market. This overaccumulation soon led to lower rates of investment,

Economic crises are capitalism's way of renewing itself by destroying excess productive capacity through bankruptcies. The recessions of the 1970s and early 80s were certainly destructive. But there was no "Great Recession" devaluing capital investments on a scale commensurate with the problem. A number of measures allowed the global system to go down a different path, often referred to as "neoliberalism." Some of these measures essentially involved technological developments. Some did not. But they must all be considered social consequences of technological change in the sense that they were all responses to the overaccumulation difficulties brought about by technological development

1. Following Nixon's unilateral decision in 1971 to in effect replace gold as the ultimate form of world money with the dollar, there was a *historically unprecedented increase in liquidity* (credit money) in the global economy in general, and the United States in particular. In principle this made it possible for markets to expand and absorb

2. If increased liquidity simply set off inflation, that would not have offered the capitalist world economy a promising way forward. Accordingly, labor was disciplined through the "Volcker Shock"of 1978, a sudden rise in interest rates designed to raise the rate of unemployment in the "core" regions of the world economy beyond what had been politically acceptable previously. The pressure on real wages that followed kept inflation contained and set the stage for a significant *increase in the rate of exploitation*. The technological changes associated with the rise of "lean production" (or "flexible production") were a major part of this story (Smith, 2000). Improvements in productivity due to the introduction of information technologies into manufacturing led to waves of layoffs in the most organized sectors of the workforce. Information technologies also furthered corporate "downsizing," allowing parts of production chains to be outsourced without sacrificing management control of the production process as a whole. The advance of transportation technologies played a major role as

globe must be regulated to ensure that such imbalances never again arise.

profits, and economic growth in the world market as a whole (Brenner 2006).

productive capacity that could not otherwise be absorbed.

in the post WWII global economy.

called free markets and "minimal" states allows individuals the greatest opportunities of living lives of their own choosing, as classical liberals hold. Nor did he accept the liberal egalitarian assertion that all individuals could stand as an equal in social life if only the proper political regulations were in place.

No attempt will be made here to definitively resolve the controversy among these three competing perspectives. In the concluding section I shall attempt to show the continuing relevance of the Marxian account of technological change by presenting a brief historical narrative of major developments in the global economy in recent decades. My goal is to suggest that the Marxian framework illuminates important dimensions of the present historical moment overlooked in competing accounts.

#### **5. Technology and social change in recent decades**

Global politics today is dominated by the crisis of state finances. The public debt of many countries has reached 60% or more of their gross domestic product, and is estimated by some to soar to as much as five times GDP within a generation. In the United States and elsewhere commentators in the classical liberal tradition proclaim that their view of the predatory and profligate nature of more-than-minimal states is fully confirmed. Invoking moral obligations to future generations, they call for deep cuts in state programs, while resisting calls to raise taxes on the wealthy whose investments "create jobs and economic growth."

Writers sympathetic to liberal egalitarian values tell a different story. State deficits have metastasized primarily because of the \$20 trillion of bailouts and stimulus provided by governments to the private sector in the wake of the "Great Recession" that began in 2008. The U.S. government in particular has allowed banks to exchange practically unlimited amounts of toxic assets for good money. This state spending saved the global economy from catastrophic collapse; banks have been recapitalized, and non-financial corporations have returned to profitability. But unemployment remains high, housing prices continue to decline, and the global economy remains extremely fragile. To reduce state deficits now would be to repeat the mistakes of the U.S. in the 1930's and Japan in the 90s, when weak economies were pushed back into recession by premature budget cuts. In the short term, state spending must increase to create jobs. If public investments are made in infrastructure, education, and new (especially "green") technologies, this will spur economic growth, making a reduction of state deficits in the future far less onerous than it would be today.

Liberal egalitarian analysts insist that inadequate financial regulation, the root cause of the crisis, be addressed as well. Seduced by the "efficient market hypothesis," regulators allowed paroxysms of "irrational exuberance" to generate one speculative bubble after another. The government bailouts following the bursting of these bubbles encouraged even more reckless behavior until, inevitably, the scale of the bailout overwhelmed state finances. Insufficient financial regulation also allowed debt levels in numerous regions of the global economy to exceed rational bounds, resulting in a growing and unsustainable imbalance between debtor and creditor regions. Funds lent to the former fueled consumption of imports and speculation in real estate or financial markets, neither of which generated the monetary returns necessary to repay the loans. A rebalancing of the global economy must now take place. Surplus regions must expand their domestic economies to compensate for the retrenchment of overly indebted consumers elsewhere and to help deficit regions reduce their debts through increased exports. In the worst cases (such as Greece) foreign lenders

called free markets and "minimal" states allows individuals the greatest opportunities of living lives of their own choosing, as classical liberals hold. Nor did he accept the liberal egalitarian assertion that all individuals could stand as an equal in social life if only the

No attempt will be made here to definitively resolve the controversy among these three competing perspectives. In the concluding section I shall attempt to show the continuing relevance of the Marxian account of technological change by presenting a brief historical narrative of major developments in the global economy in recent decades. My goal is to suggest that the Marxian framework illuminates important dimensions of the present

Global politics today is dominated by the crisis of state finances. The public debt of many countries has reached 60% or more of their gross domestic product, and is estimated by some to soar to as much as five times GDP within a generation. In the United States and elsewhere commentators in the classical liberal tradition proclaim that their view of the predatory and profligate nature of more-than-minimal states is fully confirmed. Invoking moral obligations to future generations, they call for deep cuts in state programs, while resisting calls to raise taxes

Writers sympathetic to liberal egalitarian values tell a different story. State deficits have metastasized primarily because of the \$20 trillion of bailouts and stimulus provided by governments to the private sector in the wake of the "Great Recession" that began in 2008. The U.S. government in particular has allowed banks to exchange practically unlimited amounts of toxic assets for good money. This state spending saved the global economy from catastrophic collapse; banks have been recapitalized, and non-financial corporations have returned to profitability. But unemployment remains high, housing prices continue to decline, and the global economy remains extremely fragile. To reduce state deficits now would be to repeat the mistakes of the U.S. in the 1930's and Japan in the 90s, when weak economies were pushed back into recession by premature budget cuts. In the short term, state spending must increase to create jobs. If public investments are made in infrastructure, education, and new (especially "green") technologies, this will spur economic growth, making a reduction of state deficits in the future far less onerous than it would be today.

Liberal egalitarian analysts insist that inadequate financial regulation, the root cause of the crisis, be addressed as well. Seduced by the "efficient market hypothesis," regulators allowed paroxysms of "irrational exuberance" to generate one speculative bubble after another. The government bailouts following the bursting of these bubbles encouraged even more reckless behavior until, inevitably, the scale of the bailout overwhelmed state finances. Insufficient financial regulation also allowed debt levels in numerous regions of the global economy to exceed rational bounds, resulting in a growing and unsustainable imbalance between debtor and creditor regions. Funds lent to the former fueled consumption of imports and speculation in real estate or financial markets, neither of which generated the monetary returns necessary to repay the loans. A rebalancing of the global economy must now take place. Surplus regions must expand their domestic economies to compensate for the retrenchment of overly indebted consumers elsewhere and to help deficit regions reduce their debts through increased exports. In the worst cases (such as Greece) foreign lenders

proper political regulations were in place.

historical moment overlooked in competing accounts.

**5. Technology and social change in recent decades**

on the wealthy whose investments "create jobs and economic growth."

must write off many of their foolish loans (their failure to do this has brought the Eurozone project into question). Most importantly, lending and borrowing institutions throughout the globe must be regulated to ensure that such imbalances never again arise.