Two books in the ‘Grail Tradition’

This review was first published in The Weekend Australian in May 2020.

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Joshua Gans and Andrew Leigh, Innovation + Equality: How to Create a Future that Is More Star Trek than Terminator

MIT Press; $44.99; 174pp

Andrew Wear, Solved! How Other Countries Have Cracked the World’s Biggest Problems and We Can Too

Black Inc. Books; $29.99; 324pp

For well over a quarter of a century now the Holy Grail of centre-left politics has been to square the imperatives of enterprise and entrepreneurship with a greater degree of social cohesion, fairness and equality. Having accepted the primacy of the market in the 1990s, and renounced the more statist or ‘corporate’ policies of post-war social democracy, liberal-progressive policymakers have pursued a variety of ‘Third Way’ strategies that have tried to reconcile free-market forces with higher levels of social equity. While those to their right protest that the market should be left alone to do its thing, those to their left point out that capital will always put high private returns above the needs of economic justice. Nevertheless, the quest continues, with many a brash knight bent on glory, and a host of liberal commentators tapping the coconut-halves together in their train.

In their short book Innovation + Equality, US economist Joshua Gans and Australian politician Andrew Leigh join the search for the sacred chalice. Their subject is the relationship between technological innovation and economic inequality in the West, and their central, and simple, argument is that the first thing does not lead inevitably to the second. Taking issue with the venture capitalist Paul Graham, who founded the start-up ‘accelerator’ Y Combinator and describes himself (proudly) as a ‘manufacturer of inequality’, they argue that advanced economies can be both more entrepreneurial and more egalitarian. For them, there is no necessary tension between the imperatives of creativity and fairness. We can grow the economic pie, and distribute it more evenly, too.

For Gans and Leigh, any government seeking to encourage technological innovation must accept the need for ‘creative destruction’ and also ensure that the ‘costs’ of that destruction (or, as Silicon Valley prefers, ‘disruption’) are shared by those who benefit from it. Naturally, that means higher taxes, the prospect of which will lead many economists to invoke the spectre of The Disincentive: If innovators can’t get filthy rich, why would they bother innovating at all? Gans and Leigh not only reject this argument, they also turn it on its head, arguing that the real disincentives are to be found at the other end of the process, where entrepreneurs are faced with high costs, not to mention a very high chance of failure. It is not the rewards, in other words, to which policymakers should pay attention, so much as the risks of entering the game. By redistributing resources from the star players to the rookies, governments can both encourage more innovation and lessen inequality in the process.

As elegant as this argument is, and as preferable as such an arrangement would be to the winner-takes-all dynamic that currently characterises info-capitalism, there is much that Gans and Leigh neglect or downplay in their analysis. For example, they almost always write as if innovation happens in the private sphere, whereas much foundational info-tech, from GPS to voice recognition to the Worldwide Web and the internet, emerged largely from within the state. Moreover, and carrying on from that, they never pause to question the value of the ‘amazing technological advances’ emerging from the information economy, assuming that progress in the digital sphere, together with a bit of Third Way-style redistribution, will translate into progress in the social one – into the ‘Star Trek’ future of the subtitle. But this raises the question: progress towards what? ‘Thanks to people having the internet in their pocket,’ write Gans and Leigh, ‘we got Uber, Airbnb, and Spotify.’ Talk about the poverty of our aspirations!   

One surprising omission from Innovation + Equality, given its focus on digital technologies, is any thorough discussion of the specific challenges presented by the information economy. As a number of commentators have argued in recent years, information is different from other raw materials in that it can be distributed infinitely and for free, or as close to free as makes no difference. That means that under conditions of honest competition prices tend to fall towards zero; and that means, in turn, that businesses will respond by attempting to create monopolies. In short, the levels of ‘inequality’ we see in the information economy may be unavoidable, at least as long as that economy is set up along capitalist lines. Had the authors raised this possibility (and it was one raised twenty years ago by the former World Bank economist Larry Summers, who provides a foreword to Innovation + Equality) they might have reached a more radical conclusion. 

If Gans and Leigh are optimistic about the prospect of socioeconomic harmony, then the policymaker Andrew Wear is positively exuberant. Indeed, his explicit purpose in Solved! is to take the positivity on display in the business and self-help sections of his local bookshop and re-route it to the politics section. Rather than asking what is wrong with the world, he asks what particular bits of it happen to be doing well, and encourages the rest of the world to learn from their example. The vibe is determinedly synergistic, with Wear taking what he regards as the best policies from Scandinavia/northern Europe, East Asia and the Anglosphere. Thus Denmark is lauded for its climate-change policies, Indonesia for its transition to democracy, and our sunburnt country girt by sea for its record on controlled migration.

Wear has an easy, familiar tone, and his combination of hard analysis, on-location interviews, potted histories and anecdotes is often interesting and entertaining. But his framing is a little strange. For example, in his introduction, he complains that too much policy is driven by ideology, eschewing socialism, liberalism and conservatism in favour of policies that ‘actually work’. But those three traditions are views of the world, born of beliefs about human flourishing, not policy templates to be ruled in or out on the basis of their effect on GDP. Indeed, it is obvious from the opening pages that Wear is himself a liberal, and there is something vaguely circular about the way that he uses, say, Indonesia to demonstrate the compatibility of democracy and economic growth, when a comparison of India and China would have produced a very different conclusion. How, for that matter, would those two countries compare on the issue of inequality, the subject of another chapter? Or on the issue of poverty-alleviation? If Wear thinks the ideal society should combine democracy, entrepreneurship and better social welfare, fine. But it is irritating to be told that his favoured solutions in some sense transcend the world of ideas, and that policymakers would all agree if only they could be a little less ‘ideological’.

Solved!, in short, is in the Grail tradition, and would have been a more coherent book if its author had recognised that fact, and owned it. As Slavoj Žižek never tires of telling us, there is nothing more ideological than declaring oneself to be above ideology, for it is then that one has succumbed, without knowing it, to the ‘common sense’ of the status quo. The point is important, because the day is drawing closer when liberal democracy will have to reckon with the fact that other traditions are in the ascendant. With Covid-19 causing havoc in Europe, reactionary populism still infecting millions, and the Giant Panda in the Room to our north, the current signs are not auspicious. ‘Tis but a scratch!’ say some. We’ll see.