Kodak vs Instagram: This is why it's only going to get harder to make a good living

Politicians no longer change the world, technology does. Even as wealth has become more concentrated, power has become more dispersed.

Anyone who has ever looked a graph of income distribution for the UK or the US over the last five decades can’t help but be struck by the same thing. Somewhere around 1979 or 1980, a long decline in the share of income going to the richest members of those societies halted, reversed, and has been climbing ever since. In the last decade this trend has been exacerbated. Middle-class wages have stagnated and started to fall.

So what happened at the end of the 1970s? We barely have to ask. Ronald Reagan and Margaret Thatcher, the two titans of neo-liberal economics, came to power, cut taxes and regulation, creating more dynamic but more unequal economies, the fundamentals of which remain intact today.

Whatever you think of their legacy, the scale of change they effected is impressive. Reagan and Thatcher were transformational figures: Big People doing Big Things. Obama and Cameron just don’t seem to be in the same league, and few people are yet convinced that Hillary Clinton or Ed Miliband will change the course of history.

But what if this story is wrong? What if it wasn’t politics that precipitated this epochal shift in the shape of our societies, but a force more powerful than any controlled by mere politicians?

In an important new book, the Second Machine Age, Erik Brynjolfsson and Andrew McAfee note that inequality rose over the same period in most advanced countries, including those with very different policies, institutions and cultures. In Sweden, Finland and Germany over the past thirty years, inequality has grown more quickly than in America (albeit starting from a much lower base).

The stagnation in middle-class incomes, say Brynjolfsson and McAfee, didn’t start in Washington or Westminster, but California. In 1980, Steve Jobs and Bill Gates were taking digital technology into the office and the home. By doing so they triggered a wave of economic and social change that has been gathering momentum ever since, greatly accelerated by the Internet. Its benefits have been abundant. Its costs are only now becoming apparent.

People have always worried about new technologies making human beings obsolete. Until now, however, technology has created more jobs than it destroyed, by creating new categories of goods and services. Weavers became typists; typists became computer programmers. Middle-class wages steadily increased; the rising tide lifted all boats. But digital technology, we are now learning, is different. It plays favourites.

Compare two photography companies. Kodak was founded in 1880, and at its peak employed nearly 145,300 people, with many more indirectly employed via suppliers and retailers. Kodak’s founding family, the Eastmans, became wealthy, while providing skilled jobs for several generations of middle-class Americans. Instagram was founded in 2010 by a team of fifteen people. In 2012 it was sold to Facebook for over one billion dollars. Facebook, worth far more than Kodak ever was, employs fewer than 5,000 people. At least ten of them have a net worth ten times that of George Eastman.

A 1894 advertisement for the Kodak Camera in The Graphic. Photo: Hulton Archive/Getty Images

This, in a nutshell, is why digital technology is changing our societies in such a profound way. In a wired world, it costs virtually nothing to reproduce a photo or an e-book or a piece of software or to send it across the world. Small teams of designers or engineers can make products consumed and paid for by billions, creating vast wealth for their originators like Mark Zuckerberg. But the wealth doesn’t “trickle down” because digital goods require so few people to make them, and digitally organised workplaces require fewer people to run them.

People without the ability or good fortune to make it to university or acquire valuable skills will find it increasingly hard to make a good living. Many lower-wage jobs will disappear: production line or supermarket checkout jobs are already disappearing, but as computers become get cleverer, even accountants and lawyers will start to feel the heat. Those who keep their jobs are increasingly likely to see their income stagnate, as a greater share of wealth is captured by highly skilled, the highly creative and the highly lucky.

So what can our politicians do about this? Not nothing, but certainly less than they claim or we would like to think. This is a structural shift so profound that no closing of tax loopholes or fiddling with rates can make much of an impact. Thatcher and Reagan didn’t have as much influence over their societies than we awarded them in retrospect. Today, their would-be equivalents can change even less.

In a recent interview with the Guardian, the former diplomat, adventurer and writer Rory Stewart described what had he had learned about power since becoming an MP in 2010: “We pretend we're run by people. We're not run by anybody. The secret of modern Britain is there is no power anywhere. The politicians think journalists have power. The journalists know they don't have any. Then they think the bankers have power. The bankers know they don't have any. None of them have any power.”

Stewart’s discovery chimes with the theme of a recently published book by Moses Naim, a former editor of Foreign Policy. In The End of Power, Naim argues that leaders of all kinds – political, corporate, military – face greater constraints on what they can effect than at any time in history. The problems are bigger and more complex, while the mechanisms of change have become degraded and unreliable. The Iraq war wasn’t an exercise in overweening imperial power, so much as a demonstration of its limits: the Americans couldn’t even keep the electricity running in Baghdad. Big businesses are more vulnerable to the disruption of smaller upstarts than ever before (Kodak filed for bankruptcy just as Facebook bought Instagram). In the boardroom or the cabinet room, executives know that their decisions will face greater scrutiny than ever before, and proceed more cautiously.

Being a leader isn’t what it was. Power has become more dispersed, even as wealth has become more concentrated. It’s enough to make you have sympathy for Nick Clegg, or with Barack Obama when he defends himself against the left’s charge of political timidity. The impotence of our rulers isn’t, as sometimes appears to be the case, because they are uniquely inept or feeble. It’s because so much of their power is illusory. History is being made, to borrow from Marx, “behind their backs”. The age of titans has passed.

In a wired world, it costs virtually nothing to reproduce a photo. Photo: Getty

Ian Leslie is a writer, author of CURIOUS: The Desire to Know and Why Your Future Depends On It, and writer/presenter of BBC R4's Before They Were Famous.

Photo: Getty Images
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What do Labour's lost voters make of the Labour leadership candidates?

What does Newsnight's focus group make of the Labour leadership candidates?

Tonight on Newsnight, an IpsosMori focus group of former Labour voters talks about the four Labour leadership candidates. What did they make of the four candidates?

On Andy Burnham:

“He’s the old guard, with Yvette Cooper”

“It’s the same message they were trying to portray right up to the election”​

“I thought that he acknowledged the fact that they didn’t say sorry during the time of the election, and how can you expect people to vote for you when you’re not actually acknowledging that you were part of the problem”​

“Strongish leader, and at least he’s acknowledging and saying let’s move on from here as opposed to wishy washy”

“I was surprised how long he’d been in politics if he was talking about Tony Blair years – he doesn’t look old enough”

On Jeremy Corbyn:

"“He’s the older guy with the grey hair who’s got all the policies straight out of the sixties and is a bit of a hippy as well is what he comes across as” 

“I agree with most of what he said, I must admit, but I don’t think as a country we can afford his principles”

“He was just going to be the opposite of Conservatives, but there might be policies on the Conservative side that, y’know, might be good policies”

“I’ve heard in the paper he’s the favourite to win the labour leadership. Well, if that was him, then I won’t be voting for Labour, put it that way”

“I think he’s a very good politician but he’s unelectable as a Prime Minister”

On Yvette Cooper

“She sounds quite positive doesn’t she – for families and their everyday issues”

“Bedroom tax, working tax credits, mainly mum things as well”

“We had Margaret Thatcher obviously years ago, and then I’ve always thought about it being a man, I wanted a man, thinking they were stronger…  she was very strong and decisive as well”

“She was very clear – more so than the other guy [Burnham]”

“I think she’s trying to play down her economics background to sort of distance herself from her husband… I think she’s dumbing herself down”

On Liz Kendall

“None of it came from the heart”

“She just sounds like someone’s told her to say something, it’s not coming from the heart, she needs passion”

“Rather than saying what she’s going to do, she’s attacking”

“She reminded me of a headteacher when she was standing there, and she was quite boring. She just didn’t seem to have any sort of personality, and you can’t imagine her being a leader of a party”

“With Liz Kendall and Andy Burnham there’s a lot of rhetoric but there doesn’t seem to be a lot of direction behind what they’re saying. There seems to be a lot of words but no action.”

And, finally, a piece of advice for all four candidates, should they win the leadership election:

“Get down on your hands and knees and start praying”

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.