As Nobel laureate Robert Solow demonstrated in the 1950s, the ultimate source of sustainable economic growth is innovation, that is, the development of new technology, of new organizational forms, and of better modes of governance. At the same time, disruptive new ways of producing and consuming goods and services have always encountered opposition. This opposition is sometimes driven by mere fear of the new or anxiety about the tried and trusted ways of the past disappearing, but more commonly by the distributional impact of new technologies. The famous Luddites of 19th-century England, for example, worried aggressively about the replacement of their skilled occupations by newfangled machines operated by low-skilled workers.
The same dialectic is central to the innovation debate today. Advances in fields as diverse as nanotechnology, information technology and global supply chain management hold the promise of unprecedented levels of prosperity for humanity as a whole, but they have led to widely held concerns about the future of the middle class in the West. The past few decades have seen significant improvements in the standard of living of the poorest citizens of the world and solid gains for the planet’s most privileged, but the hollowing out of labor markets in developed countries has led some to believe that a dangerous divergence of prospects is unfolding.
This belief underpins an understandable hesitation to embrace “the glory of this latter house,” but as in Haggai’s prophecy, the benefits of innovation cannot be underestimated. Economist Xavier Sala-i-Martin, of Columbia University, has found that hundreds of millions have been lifted out of poverty over the past half century, and that rates of extreme poverty have been reduced by some 50%. Anyone with an internet connection now has access to a wealth of information unavailable to even the most powerful masters of the universe in 1970s. The rising threats of HIV/AIDS, malaria, and tuberculosis have been stemmed, and child mortality is nowhere near the levels it was at a mere 25 years ago. All of these blessings are driven, one way or another, by innovation. The dangers posed by innovation pale in comparison. What political leaders should do is make the case for progress for the many, while helping those whose futures are suddenly a bit bleaker prepare for a transition as painless as possible.