Why Krugman got it wrong on the Luddites

It is always rather a dangerous business appealing to the Luddites.  They got a bad press two centuries ago and they get a bad press now.  They remain the byword for people who, as we used to say in the 1970s, "stand in the way of progress" - who cling to stage coaches in an age of rockets.

But the legendary liberal economist Paul Krugman appeals to them bravely and rightly in a column for the New York Times (and thank you Amanda @briesias for pointing it out or I would have missed it).

And I was glad he did, because he backed the thesis in my new book Broke: Who Killed the Middle Classes.  The economy is entering a new phase, and it doesn't look good for the middle classes - especially as knowledge work is increasingly being automated.

Of course, what Krugman means by the 'middle classes' is rather different - he means blue collar workers, and there is nothing controversial about their economic plight.  No argument.

These are also global trends that threaten to destroy the livelihoods of graduates, leaving behind a shrinking elite and a huge proletariat - and I've tended to concentrate on avoidable UK trends so far.  But he is right that there is a problem.

Today's edition of Today had a series of items that put this at the top of the agenda - from the frustration of the new middle classes in Latin America to the 20 per cent rise in rents in the UK over five years (based on house prices).

He's also right that the Industrial Revolution did, in fact, uproot and destroy the lives and livelihoods of generations of the first English industrial workers.  It took those generations for the rewards of the Industrial Revolution to raise the living standards more widely.

So, he says, we need an effective safety net.  I'm sure we do, but that isn't a solution.

It is a nervous moment before disagreeing fundamentally with Krugman.  Many people don't survive the experience - but he's wrong.  He's wrong for the following reasons:

• A springier, more effective safety net, is not going to halt the shift in power and resources to the very rich.  We need to tackle the inefficient structures of business which allow a small elite to capture all the benefits.  Our business structures are still industrial age ones and they urgently need reform.  Call it pre-distribution if you like; we need it.

• Krugman assumes that the IT revolution we are seeing now will be a repeat of the Industrial Revolution then, and that eventually, painfully, the rewards will be spread.  There is really no evidence that history will repeat itself in this way - quite the reverse in fact.  It required major anti-trust legislation to prevent the enrichment of a tiny elite last time, and it will require the same all over again.

• There are a whole range of knowledge processes which are not amenable to virtualisation - and they are the preserve of professionals: doctors and teachers can benefit from IT enormously, but we will all be poorer if they are replaced by it.  Some professions require human relationships to make them effective.

So there is hope for the middle classes, however defined - but not from weaving themselves a new, improved, glorified safety net for them to live in.

They are going to have to build a political force capable of clawing back power and wealth from the new elite, and to defend the middle class life.

They are also going to have to patrol and defend their own front line.  If they accept that teaching and doctoring can be digitised, and all the other professions that require relationships to be effective, they will be helping to usher in an age of ineffectiveness.

That is bad enough - but they will also be undermining their own last bastion.