Jan Eeckhout (a native Belgian who resides in Barcelona and used to work in the USA and Great Britain) has lately published the book entitled “The Profit Paradox: How Thriving Firms Threaten the Future of Work” (2021). This is an important book about the influence of big companies on labor markets, innovation, competitiveness, and societal inequality. It may be criticized for looking at the issues in hand from not a sufficiently inclusive perspective (e.g. historically speaking every preceding technological cycle had similar problems at its middle point). It is, however, quite compelling and persuasive in analyzing monopolist power that big companies exert on all around them (governments, other businesses, organizations, individuals).
Jan Eeckhout is not the first to signal that new technologies and platform economy have spawned big firms capable of curbing workers’ wages and holding in check possible competition. Steven Hill was quite vocal in his “Raw Deal: How the Uber Economy and Runaway Capitalism Are Screwing American Workers” (2015) about the related concerns. Daron Acemoglu has been discussing the impact of new technologies on labor market trends in multiple publications. Indeed, he is a world leading expert on this matter. He is famous for defending the view that without major changes in our economic and social policies automatization and robots would bring about a net job loss (more jobs would disappear than get created). However, Jan Eeckhout’s contribution to the debate is the most recent and radical.
It is also timely. The world economy currently suffers from the SARS-CoV-2 pandemic, the bubbles in the property, bond and stock markets are about to burst, inflation increases significantly and it cannot be tamed by raising interest rates as governments, companies and households are overwhelmingly indebted. New technologies have a great potential. We may use them for substantially curtailing industrial waste, using energy more efficiently, manufacturing tailor-made products that would serve better and last longer, revitalizing local cooperation and healthy competition, etc. Instead new technologies have been used in a way that has resulted, among other things, in the following: a) there are less start-ups now than at any point in the last 30 years (the objective of big firms is not to innovate; it is to prevent others from entering the market; b) wages have stagnated over this period for the majority of workers.
It means that all this talk about ubiquitous innovation and sharing the fruits of scientific advances equitably is a sham. To delve deeper into the above issues we recommend that you read Eeckhout’s book. If you have thoughts about how to fix the present conundrum please write to us (MBA – Innovation and Data Analysis) at firstname.lastname@example.org