From Luddites to Taxi Strikes: How to Deal with Threats to Innovation

By
John Engle
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Fear is a powerful thing. It can stymy progress and even set it back. It closes minds and promotes violent reaction. Yet it is a human emotion we cannot escape. From the Luddites of the early 19th century protesting the rise of mechanization in the textile industry to the taxi drivers who are today fighting bitterly against the rise of Uber, fear of personal loss from changing economic realities has driven opposition to innovation and improvement.

Among supporters of free markets, the knee-jerk reaction to these types of protest is frequently to scold, to tell the workers in the disrupted industry that it is better for the economy and for all consumers. Little thought is given to the concerns and anxieties of those individuals knocked down by the gales of creative destruction, this is a bad move.

The reality is that, while the market does eventually correct and everyone is made better off in a dynamic and innovative economy, the market does not correct instantaneously. In the interval, there can be real suffering for individual people. There is a strong case to be made that a mechanism for smoothing the worst pains of those most affected by an economic disruption is worth having and that the state can, and even should, play a role in maintaining that mechanism. Examples of such policies include things like unemployment benefits and, perhaps most importantly, reskilling services.

That may seem counterintuitive to those of the libertarian persuasion; after all, are we not meant to be working to limit or expunge government’s distorting impact on markets and employment?

Yet the problems with not providing such services is clear: When an industry is disrupted by innovation, the benefits tend to be diffuse (i.e. slightly reduced transport rates for all users of Uber) and the costs concentrated (i.e. taxi drivers losing fares and equity in their medallions). While the net benefit should be obvious, the organizing power of focused opposition can muddy the issue. It can become expedient for politicians to favor incumbent industry, since those incumbents can provide organizational and financial muscle to campaigns that the general public will not.

This sort of opposition and entrenchment against progress is already observable, despite the existence of a wide social safety net. In the absence of such a protection, the fight against change would be all the more vicious, and ultimately costly to all consumers. As libertarians, we need to think in realistic terms about how human beings react under threat, not just about overall benefits that accrue.

Looking more generally at the transformation of the American economic landscape, we can see the consequences of large-scale change to the nature of work and production, absent a coherent plan to get these workers into new lines of employment. The result has been mass unemployment in many of the country’s old industrial centers, and a rising sense of grievance among those who have felt left behind.

The rise of Donald Trump can in many ways be tied directly to that grievance. His promise to restore the old industrial core through government intervention played a major role in his victory. To many of these people, the free market is the problem, not the solution.

An understanding of that current perception must inform how we as libertarians address these issues. Economic anxiety has driven the rise of a brand of populism that now threatens to overwhelm free market principles in America and around the world.

The libertarian pitch to workers has to comport with the lived reality of those dealing with painful change. Yet the current response that focuses most on giving money to those out of work is a dead-end. It only softens some of the economic blow of a lost job without helping to furnish the tools people need to adapt to changing economic realities.

A deep commitment to reskilling is the only way to remove most of the sting of economic disruption. Both major political parties support this in part, but they lack both vision and action. By utilizing private providers of training, the government could provide a vastly more effective suite of services that help smooth off some of the rough edges of change without undermining the dynamism of the free market engine. We must work to help people get excited about the future of the economy, not pining for an unreachable past.

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John Engle

John Engle is a merchant banker and author living in the Chicago area. His company, Almington Capital, invests in both early-stage venture capital and in public equities. His writing has been featured in a number of academic journals, as well as the blogs of the Heartland Institute, Grassroot Institute, and Tenth Amendment Center. A graduate of Trinity College Dublin, Ireland and the University of Oxford, John’s first book, Trinity Student Pranks: A History of Mischief and Mayhem, was published in September 2013.

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