Creative Destruction at Work

OXFORD – Throughout history, technological progress has created enormous wealth but also caused great disruption. The United States’ steel industry, for example, underwent a major transformation in the 1960s, when large, integrated steel mills were gradually put out of business by mini mills, destroying the existing economic base of cities like Pittsburgh, Pennsylvania, and Youngstown, Ohio. The mini mills, however, vastly increased productivity, and created new types of work elsewhere.

The story of US steel illustrates an important lesson about what the economist Joseph Schumpeter called : Long-run economic growth involves more than just increasing output in existing factories; it is also implies structural changes in employment.

We can observe a similar phenomenon in the current information and communications technology (ICT) revolution, which has affected most areas of the modern workplace, even those not directly associated with computer programming or software engineering. have created prosperous new businesses (even business clusters) while making certain manufacturing workers redundant and sending older manufacturing cities into decline.

But the likes of Detroit, Lille, or Leeds have not suffered because of falling manufacturing output; on the contrary, output has been growing in these cities over the past decade. Instead, their decline stems directly from their failure to attract different types of jobs. To a large extent, this is a failure of policy. Rather than trying to preserve the past by propping up old industries, officials should focus on managing the transition to new forms of work. This requires a better understanding of emerging technologies, and how they differ from those that they are supplanting.

An important feature of the Industrial Revolution’s early manufacturing technologies was that they replaced relatively skilled artisans, which in turn increased demand for unskilled factory workers. Similarly, Henry Ford’s assembly line for manufacturing cars – introduced in 1913 – was specifically designed for unskilled workers to operate machinery, thereby allowing the company to produce its popular Model T – the first car that middle-class Americans could afford.

Indeed, much of the story of industrial development over the last century can be seen in terms of competition between an increasingly educated workforce and new technology that would dispense with their skills. We have already seen the impact – not least in the car industry – of robots that can carry out the routine jobs that were once performed by thousands of middle-income assembly-line workers.

Even greater workplace disruption lies ahead. Though history counsels caution in predicting how technological progress will play out, we already have a reasonable idea of what computers will be able to do in the near future, because the technologies are already being developed. We know, for example, that a wide range of skilled professions can be simplified with the help of big data and sophisticated algorithms.