Misunderstanding the British Industrial Revolution Is Reinforcing Technology Pessimism About AI

Detractors of capitalism argue that it took over fifty years for the British Industrial Revolution’s benefits to reach average workers. That narrative is at best contested and, at worst, wrong.

The older I get, the more I realize that most people want to believe what they want to believe. Probably including me. Case in point: So many people today have wrongly bought into the idea that technological innovation not only fails to benefit workers but actively hurts them.

Recently, it has become fashionable for detractors of capitalism to argue that it took more than half a century for the benefits of the British Industrial Revolution to trickle down to average workers. In the meantime, the greedy capitalists got the goldmine, while the workers got the shaft.

And so, of course, we are told that this will happen again as AI “wipes out jobs” and lets a few tech bros strike gold, leaving one or two generations of immiserated proletarians in its wake. Why would any legislator want to put the policy pedal to the metal for AI when that’s the outcome? The answer is that they would not.

But that is precisely the point. The goal of today’s neo-Luddite, anti-corporate activists is to slow, if not stop, AI. Let’s all retreat to our worker-owned communes in Hobbiton.

However, this historical narrative is at best contested and, at worst, simply wrong. As is the current wave of AI prognostication. In a Washington Post op-ed from August, techno-optimist James Pethokoukis surprisingly succumbs to this pessimism, writing that:

During the Industrial Revolution, Britain’s productivity rose while wages stagnated — a period dubbed “Engels’s pause,” after Friedrich Engels’s grim account of industrial poverty. Early mechanization spoils went mainly to factory owners, while laborers saw their traditional livelihoods disrupted, sparking the infamous Luddite attacks on textile machinery. Britain’s leaders pressed ahead — and later generations reaped enormous prosperity — but the long lag in sharing those gains fueled years of social unrest.

James worries that the development of AI may lead to similar results today, only this time with policymakers unwilling to wait it out and instead moving to slow the pace of innovation.

But this is a misreading of history, albeit one many people fall for. The reality is that many prominent economic historians find that it did not take fifty years for wages to rise for the average British worker.

One article in the Economic History Review finds that “the evidence suggests that material gains were even bigger after 1820 than optimists had previously claimed, even if the concept of material well-being is expanded to include health and environmental factors.” Another study in Oxford Economic Papers found that the labor share of income changed little between 1820 and 1870, belying the notion that capitalists were capturing most of the gains.

In addition, pessimists gloss over several major disruptions that would have constrained both GDP growth and real incomes, as well as a key analytical distortion:

• Britain was still paying lenders the enormous debt incurred during the Napoleonic Wars after 1815.

• The period was marked by repeated years of poor harvests driven by adverse weather, which lowered output and living standards.

• Growth rates themselves have often been overstated, with more recent research finding that labor productivity growth during this period was actually quite low. Labor productivity averaged below 0.4 percent from 1770 to 1830, rising only gradually to around 0.8 percent by 1860.

This makes sense, as many of the key technologies now portrayed as revolutionary, such as the steam engine, had limited industrial applications at the time (for example, coal mining and rail transport). There simply was not enough new output for either workers or owners to capture.

Finally, let’s consider the term “Engels’s pause.” That Engels said this should indeed give us pause. Because of the incalculable human suffering and death their acolytes caused around the world, anything Marx or Engels wrote deserves deep skepticism or to be rejected outright. These were not admirable figures.

To take just one example, consider the sheer absurdity of Marx’s core claim that capitalist growth would continue while wages stagnated, thereby making proletarian revolution the only path to higher incomes. Consider this nonsense passage from Capital:

The accumulation of wealth at one pole is, therefore, at the same time accumulation of misery, agony of toil, slavery, ignorance, brutality, and mental degradation at the opposite pole.

Also from Capital:

Within the capitalist system, all methods for raising the social productiveness of labour are brought about at the cost of the individual laborer; all means for the development of production transform themselves into means of domination over, and exploitation of, the producers.

And finally, from The Communist Manifesto:

The modern laborer...instead of rising with the progress of industry, sinks deeper and deeper below the conditions of existence of his own class. He becomes a pauper, and pauperism develops more rapidly than population and wealth.

It is astonishing that these charlatans are still taken seriously, particularly on college campuses, many of which host their own Marxism clubs, given how completely deranged this hypothesis turned out to be. For it to have come anywhere close to reality—which clearly it did not, as median wages rose at least 15 to 20 times while profit rates did not explode—the laws of competition would have had to be repealed.

Capitalists would have needed the power to raise prices and keep wages low without any market consequences. That did not happen. Firms that adopted labor-saving machinery were required to lower prices in order to compete with rival firms installing the same technology. There was no enduring pool of “surplus value” for greedy capitalists to capture, except briefly for particular firms that had invented a genuinely “better mousetrap.”

Yet people throughout history, including people who were presumably smart and well educated, fell for this nonsense. Many still do today.

After all, if you want to destroy capitalism—and the freedom and respect for human dignity that come with it—you must first convince the peasants, the proletariat, and the intelligentsia that capitalism is an irreparably broken system. The way you do that is by spinning preposterous claims about capitalists hoarding all the gains. The world has suffered untold misery and death because of this fundamentally destructive doctrine and, in some places, continues to suffer today.

While most of today’s anti-capitalists (and capitalist doubters) are not full-blown Marxist-Leninist-Maoist totalitarians, they nonetheless seek to limit technology and constrain corporate capitalism. In that context, promoting the idea that AI’s benefits will flow only to the rich is no accident; it is entirely consistent with their agenda. We are warned not to repeat the so-called mistakes that much of the world made after the 1820s.

Finally, lest anyone assume I am a card-carrying, Paul Ryan–style free-market libertarian conservative, let me assure you that I am not. I am happy for the state to play a key role in what Mike Lind and I have called “national developmentalism.” But national developmentalism works only by supporting firms operating within a capitalist system and by endorsing and embracing, rather than demonizing, technological change. Anti-corporate, anti-capitalist, and anti-technology policies are a dead end for growth and innovation—and, if anything, a reliable recipe for keeping the proletariat immiserated.